COMMENT: Cement Boots
May 1, 2009
Banks are screaming for Mexico to stump up billions of dollars and bail out Cemex. They decry the arrogance and complacency of the Monterrey-based cement giant, hinting that lack of prompt resolution would have a grave impact on funding to all Mexican corporates.
True: Cemex got greedy and looked the refinancing gift horse in the mouth. And the Mexican government response has appeared confused at best, despite looming systemic risk. But financial institutions riding the Cemex fee train for so long did not lend, advise or sell exotic derivatives to the cash cow blindly. They must share the pain.
When Cemex succeeded in a hostile $15.3 billion bid for Australian building materials firm Rinker in 2007, the LatAm market cheered, just as it had applauded Vale’s $18 billion purchase of Canada’s Inco a year earlier. The Rinker buy capped a string of high profile deals that turned a provincial cement business into the third largest integrated building materials firm in the world.
Investors were looking forward to a repeat performance of the 2004 purchase of British cement firm RMC with $5.8 billion in debt. Cemex repaid ahead of...
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