Cemex to sell assets in Americas to reduce debt

CEMEX HAS announced a plan to sell assets in Central and South America, the first step in raising money to pay creditors after the largest cement maker in the Americas won a reprieve on a $7.25 billion loan.

Cemex’s notes maturing in 2016 rose 1.75 cents to a 13-month high of 103.19 cents on the dollar yesterday after it said that more than 90 per cent of its banks agreed to extend the maturity of its loan by three years to February 2017.

The company said after markets closed on Tuesday that it filed an application with authorities in Colombia to sell a minority stake in a unit Cemex Latam Holdings.

While yields on Cemex’s notes have tumbled to 8.67 per cent from a record 22 per cent on October 4th, when concern peaked that it would breach covenants on the loan, Union Bancaire Privee’s Jean-Dominique Butikofer says the company needs to show it will keep the promises made to creditors.

“After all that happened we’re going to need confirmation that they sold all the assets, that they have enough cash and that they’re going to survive,” Mr Butikofer, who helps oversee about $1 billion of emerging-market debt and owns Cemex’s bonds, said after the debt announcement. “If every second year they’re going to go through financial turmoil one day nobody will trust them.”

The new refinancing agreement requires that Cemex – which owns Readymix in Ireland – make a $1 billion payment to its banks next year and satisfy additional debt requirements.

The company, which has reported 11 straight quarterly losses, obtained the original $15 billion loan from banks including HSBC Holdings, Banco Santander, Citigroup and Banco Bilbao Vizcaya Argentaria to avoid a default in 2009 after the US housing slump crushed demand for building materials.

Selling a stake in the unit holding Central and South American assets is among the “alternatives Cemex is pursuing in connection with its ongoing initiative to reduce debt and extend its debt maturities”, it said in a statement.

"Central and South America are among the most solid operations the company has," Carlos Hermosillo, an analyst with Grupo Financiero Banorte, said. – (Bloomberg)