LatinFinance - July/August 2015 - 39

Coming out of the summer holidays,
the company returned to the bond market
with a $1.6 billion equivalent sale in dollars
and euros. Brookrunners Bank of AmericaMerrill Lynch, BNP Paribas, JPMorgan and
Santander sold the 2022 and 2025 notes at
4.75% and 5.7%, respectively, after lowering
the interest rates from initial price thoughts
of 5.125% and 5.875%, while investors piled
onto the bond sales. The cement maker
followed the bond sale again with a liability
management exercise, buying more than
half of the outstanding on its 2018s and 2020
notes, which both had coupons of higher
than 9%.
In February, the cement maker returned
to the euro and dollar markets, raising
$1.37 billion. It sold a €550 million ($616
million) 2023 non-call four at 4.375%, and
a $750 million 2025 non-call five at 6.125%.
Bookrunners BofA-Merrill, BBVA, Citi,
Crédit Agricole and HSBC were heard to
take in more than $9 billion worth of orders
from investors for the two tranches. The
company used the proceeds to buy back its
March 2015 convertible, its 9% 2018 and its
9.25% 2020 notes.
"The impact of this exercise is being told.
It's less cash out for the company, but not
only that we have extended the average debt
life," González says.
As of March 2015, the Mexican building
materials producer's debt had an average
life of 5.3 years, up from 4.3 years at the
beginning of 2014. Meanwhile, its cost of
debt decreased by $30 million annually in
March, compared to the same time a year
before.
"To get a bond away, you have got to
have the right market conditions and a good
credit story, and one thing I'll say about
Cemex at the moment is that they do have a
good credit story," says CreditSights' Belton.

The new converts pay 195bp over fiveyear swaps, a figure that could be adjusted
if the company's five-day volume-weighted
average share price (VWAP) falls below
$8.62.
"Our approach has been gradually taking
them out by an early conversion into shares
... or extending them," says González. "All of
that is consistent with our goal of getting an
investment grade rating."

Keeping its options open
Besides traditional bond sales, Cemex has
hit the market with convertible bonds,
giving it flexibility to buy back the debt with
cash or issue shares - supporting its capital
structure.
In September, Cemex went a step
further, issuing $200 million of contingent
convertible units. These were effectively
options to issue convertible subordinated
notes six months later, if needed to cover
a redemption. Because holders of the
converts maturing in March did not first
swap them to equity, Cemex exercised the
option taken out in September, using it to
roll over the maturing paper.

Whittling down bank debt
In November, Cemex took advantage of
stronger credit metrics and an improving
building sector to partly refinance loans
syndicated in 2009 and 2012.
The cement maker used the new $1.87
billion loan, along with $350 million the
company raised in a September bond issue,
to partially repay a line of credit of about $4
billion due in 2017, leaving $2.2 billion on
the loan.
"Those two financings were done under
a stressful situation environment. And the
third refinancing, which was in late 2014,
was under conventional market driven
conditions, meaning this was a voluntary

FERNANDO GONZÁLEZ, CEMEX

"THOSE TWO
FINANCINGS WERE
DONE UNDER A
STRESSFUL SITUATION
ENVIRONMENT.
AND THE THIRD
REFINANCING, WHICH
WAS IN LATE 2014,
WAS UNDER
CONVENTIONAL
MARKET DRIVEN
CONDITIONS,
MEANING THIS WAS
A VOLUNTARY
TRANSACTION"

transaction," says González, adding that
the company plans to "pro-actively" pay
off the debt.
The new loan came from BofA-Merrill,
BBVA Bancomer, BNP Paribas, Citi, Crédit
Agricole, JPMorgan and Santander Mexico.
It pays between 250 and 375 basis points
over Libor for the amortizing 2019 loan,
tied to a leverage grid.
"This facility used to be $4 billion, and
last year we put in place another credit for
about $2 billion. We did it last year even
though the [bank debt] matures in 2017, so
I think that that event is a good indication
of something we might do again, and
we won't be waiting until the very end,"
González says. 
International growth
This year, Cemex plans to further its
leverage ratio by selling between $1 billion
and $1.5 billion of assets. Concerning debt,
González says that the company's next
step is to refinance the roughly $2.2 billion
outstanding on its bank loans.
"Given that there is no other imminent
maturities between now and then, other
than the [March] convertibles, that would
be the next thing to begin work on, could
be this year, could be next year," González
says.
Belton, of CreditSights, says that the
company will likely divest non-performing
assets.
"It seems like surplus properties in their
portfolio, bits of land that don't actually
fulfill a deal of use to them, that don't
generate a lot of profit, hopefully they can
sell those and generate proceeds to lower
their debt," he says.
For growth ahead, González says
that Asia and the Americas are the most
promising regions.
"I think we are very positive about the
Americas. The US, which is a developed
market, is the market that is contributing
the most to Cemex's bottom line, because
the US is recovering.
"We think that Mexico is very positive in
terms of demand and outlook for the next
few years. And Central and South America
the same. Of course there are headwinds.
The reduction in the oil price does affect
Mexico and Colombia, but we think things
will tend to stabilize and the fundamentals
of the these markets are quite positive
in terms of their demographics, their
need for infrastructure and government
programs aimed at addressing all of these
requirements." LF

July/August 2015 - L ATINFINA NCE.COM 39
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