Mexico’s Cemex in Talks to Refinance $3 Billion Bank Debt

Cemex SAB is in talks with banks to refinance its $3 billion credit facility.

(Bloomberg) — Cemex SAB is in talks with banks to refinance its $3 billion credit facility.

The largest cement maker in the Americas is proactively managing its liabilities, the company’s Chief Executive Officer Fernando Gonzalez and Chief Financial Officer Maher Al-Haffar said in an interview. The company has been seeking to raise its debt rating to investment grade after S&P Global Inc cut it to junk in 2009. 

“We’re in current discussions with our banks, because the biggest amount of debt that is maturing is bank debt,” Al-Haffar said from Bloomberg News’ offices in New York. “What we may be doing in the bank market is likely to transform our maturity structure quite nicely.”

The revolving credit facility, which was last refinanced in late 2021, will probably be extended 100%, he added. Debt with banks stood at $3 billion at the end of June.

The refinancing plan comes amid a strong Mexican peso, which appreciated by more than 16% over the last year. That has been “very convenient” for the company whose debt is mostly denominated in dollars and euros, said Gonzalez, but could become more complicated if the strength extends into the long term. 

“The dynamics might get sort of complex because we increase prices according to inflation in pesos,” Gonzalez added. If the peso appreciates further “then prices in dollar terms are going to be huge.”

The company’s dollar bonds have returned 5.7% this year, compared to an average 2.1% return on debt from Latin America in that period, according to a Bloomberg index. The company’s perpetual note fell about a cent on Thursday to trade at 103.6 cents on the dollar, according to Trace data. 

In August, S&P wrote that it saw the possibility to upgrade Cemex’s credit rating within the next six to 12 months if the company continues to expand profit margins while keeping its financial discipline. 

Local Debt

Cemex is also considering issuing local currency bonds known as Certificados Bursatiles (Cebures), Al-Haffar said. The last time the company sold debt denominated in pesos was in 2011, according to data compiled by Bloomberg. Cemex is joining a string of Mexican companies, including billionaire Carlos Slim’s America Movil, that are taking advantage of the strong peso to sell local currency debt.

Gonzalez noted that the US and Mexico will likely see a boost from onshoring and nearshoring, as the US’ Inflation Reduction Act and a global shift to make goods closer to the world’s largest consumer market have helped spur investment in North America. At the same time, Cemex is seeking to gradually sell off assets in emerging markets as it focuses on its business in the US and Europe, he said. Bloomberg reported earlier this month that Cemex is exploring a sale of its Dominican Republic business.

“We are now interested in investing mainly in the US and Europe, and, over time, as we did in the case of our assets in Costa Rica and El Salvador, to divest some of the emerging market positions,” said Gonzalez.

–With assistance from Maria Elena Vizcaino.

(Updates with details on bank debt in fourth paragraph and bond move in seventh paragraph)

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