Cemex changes financing agreement over COVID-19

Cemex changes financing agreement over COVID-19

Asset Management Debt Capital Markets Fixed Income Funds Mexico Coronavirus Latin America

Mexican cement producer Cemex announced on Tuesday that it had amended its facilities agreement with several financial institutions as part of its strategy to respond to the effects of COVID-19.

The amendment affects the consolidated leverage and coverage covenants in the facilities agreement that was originally drafted in July 2017. The amendment increases the leverage covenant to 6.75X for June 2020 and to 7.00X for September 2020 through March 2021. Interest-rate margins were accommodated "to the changes to the consolidated leverage covenant."

As part of the amendment, Cemex agreed to limit capital expenditures, as well as acquisitions and share buybacks.

"We are very pleased with the completion of this process and with the support of our lenders," Maher Al-Haffar, CEMEX’s Chief Financial Officer said in a statement, adding: “We are proud of our track record in working together with our bank group in both good and challenging times.”

In January, Cemex sold assets in the UK to the British constructions materials company Breedon Group for $235 million, including $31 million in debt.

The cement company had announced in 2018 a plan to sell around $1.5 billion to $2 billion worth of assets in a divestment program seeking to lower debt and increase profits.

In November last year, Cemex said its US affiliate Kosmos Cement agreed to sell a cement plant in Kentucky to Eagle Materials for $665 million.

In the first three months of 2019, Cemex agreed to sell assets in Germany, Finland, Latvia, Lithuania, Norway, Sweden and Turkey in three separate deals for a combined $655 million.

In its first quarter report, the company said construction activity across most of its markets were being impacted by the COVID-19 pandemic, adding that, in order to cut costs, its leadership and employees were waiving a percentage of their salaries for three months. The company said it was also suspending or reducing capital expenditures, operating expenses, as well as production and inventory levels.

The company’s consolidated debt at the end of this year’s first quarter totaled $11.7 billion dollars, up 4% year-over-year.