Cemex raises cash for debt refinancing

Cemex raises cash for debt refinancing

Bonds Debt Capital Markets Corporate & Sovereign Strategy Fixed Income Mexico Latin America

Mexican cement maker Cemex raised $1 billion in the cross-border bond market on Tuesday, raising cash to refinance debt. 

The company priced the new 2027 non-call three notes at par to yield 7.375%, sources involved in the deal told LatinFinance 

The company is scheduled to settle the new notes on June 5 

BBVA, Citi, Crédit Agricole and JPMorgan jointly led the transaction, while Bank of America, HSBC, ING and Mizuho acted as passive bookrunners, sources said. 

The new issue concession was around 25 basis points, one source said. 

The company started with the initial price talk in the 8% area, setting guidance at 7.5% plus or minus 12.5 basis points. It then launched the deal at 7.375%, sources said. 

The company came to the bond market after Fitch Ratings downgraded it’s foreign currency issuer default ratings to BB- from BB on Sunday and maintained its negative outlook. The new notes carry a BB- credit rating from Fitch.

"The downgrade reflects our expectations that the company's capital structure will weaken beyond its rating sensitivities for a sustained period. We believe this will be caused by lower demand for cement in Mexico and the US due to a downturn in construction spending caused by a sharp economic contraction in both countries," Fitch said in Sunday's report. 

In its financial statement for the first quarter this year, Cemex said construction activity across most of its markets was being impacted by the COVID-19 pandemic and added that executives and employees had agreed to waive part of their salaries for three months to cut costs. It also said it was cutting investments and operating expenses as well as production and inventory levels. 

Before Tuesday’s transaction, Cemex had $6.2 billion in outstanding bonds, $4.6 billion in dollar-denominated debt, and $1.6 billion in Euro-denominated debt, according to data provider Refinitiv. 

Cemex's 5.45% 2029 bond, with a 2024 call feature, traded down 1.75 points in price to bid 90.50 on Tuesday, pushing the yield up to 6.82% or 615 basis points over the benchmark 10-year U.S. Treasury, according Refinitiv. The bond was sold in November at par.