Cemex SAB (CEMEXCPO), the largest cement maker in the Americas, may have its credit rating cut by Standard & Poor’s, which said the company’s recently announced refinancing proposal “could result in higher short-term risk.”
The company, based in Monterrey, Mexico, proposed last week to refinance $7.3 billion in bank debt, including a three-year extension on debt due in 2014 and an initial $1 billion payment to lenders by March 31, 2013.
“The proposed payment in 2013 could add significant short- term risks to the company as it is mostly dependent on the completion of asset sales, because discretionary cash flow that we estimate at about $200 million during 2012 would not be sufficient to meet” the proposed payment, S&P analyst Luis Martinez said in a statement.
The company is seeking to prevent a financing crunch (CX:US) in 2014 as a housing slump in the U.S. and a deepening debt crisis in Europe erode sales. Cemex’s debt is rated B- by S&P, six levels below investment grade and seven steps lower than Mexico’s.
“We believe that Cemex is committed to raising the required resources, but volatile market conditions due to the euro zone debt crisis make it uncertain if the company can successfully fulfill it,” S&P said in the statement.
S&P placed Cemex’s debt ratings on CreditWatch with “negative” implications and said it expects to resolve the CreditWatch in the next three months.
Jorge Perez, a spokesman for Cemex, declined to comment.
The company said last week it planned to hold talks June 29 and July 2 with all of the involved lenders after discussing the proposal with banks holding about 50 percent of the outstanding debt.
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