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Cemex SAB (CEMEXCPO)’s stock and bonds rallied after the largest cement maker in the Americas said it’s negotiating with banks on extending the maturity of a 2009 loan agreement that prevented default.
The three-year extension would push the maturity to 2017 and include a $1 billion debt payment in 2013, Cemex said today in a statement. The Monterrey, Mexico-based company plans to hold talks June 29 and July 2 with all the involved lenders after discussing the plan with banks holding about 50 percent of the outstanding debt from its 2009 accord.
Cemex has struggled since that agreement to meet debt limits imposed by creditors as the U.S. housing slump and global economic slowdown hurt demand for building materials. Revised financial and operational covenants are part of the new proposal, Cemex said.
“This would take away the worry around Cemex for the next four years,” Esteban Polidura, a Deutsche Bank AG analyst in Mexico City who recommends buying the American depositary receipts, said in a telephone interview. “There are good possibilities that the refinancing will be done with all the banks.”
Cemex rose 7.7 percent to 8.53 pesos at the close in Mexico City, the biggest increase since Feb. 2. The shares have gained 19 percent this year.
Cemex convertible 4.875 percent bonds due in March 2015 rose 4.7 cents on the dollar to 82.87 cents at 3:52 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The yield on the notes fell 246 basis points to 12.5 percent.
“While uncertainty remains large in the global economy now, presumably by 2017, the construction sector would recover, allowing the company either to repay its loans or refinance under easier terms,” Joe Kogan, head of emerging markets strategy with Scotia Capital Markets in New York, wrote in a note to clients.
Cemex’s credit rating was cut seven grades by Standard & Poor’s during a five-month span ending in March 2009 after the company’s debt tripled following the $14.2 billion purchase of Rinker Group Ltd. two years earlier.
The deal, completed just as a housing slump hit the U.S., was part of a two-decade, $29 billion acquisition spree by Chairman and Chief Executive Officer Lorenzo Zambrano.
“The refinancing demonstrates that the banks have no choice but to continue working with the company’s management, especially if the company continues to slowly pay down debt,” Kogan said. “The company is so large and the cement merger and acquisition market is so depressed that the banks do not have any way of recovering their loans quickly by forcing mass asset sales.”
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