Thursday, 22 January 2009

Cemex has Its Credit Ratings Removed From Investment-Grade by S&P;

Cemex SAB, the biggest cement producer in the hemisphere, yesterday had its credit ratings cut to junk status (BB+ from BBB-) by Standard & Poor's. Its Spain-, Mexico- and U.S.-based subsidiaries were also downgraded. S&P alleged that the deterioration of the economies of those three countries, which together are the source of 75 percent of Cemex's revenue, will hurt the company's debt-servicing ability. Cemex owes more than $16 billion to banks, bondholders and investors.

S&P called Cemex's cash holdings and reserves as ''weak.´´ Despite efforts by Cemex to refinance most of its $6 billion in maturing debt this year, S&P is concerned that relative to cash flow, the maturities calendar is quite heavy. Up to date, more than 60 percent of the company's 2009 obligations are covered; covenants of credit lines were changed to help Cemex stretch out payments. Cemex may be hurt by cement price declines in the U.S., a housing recession in Spain and flagging construction activity in Mexico. During the days of irrational exuberance a few months before the global credit crisis got out of control, Cemex paid more than $14 billion for rival Rinker Group, probably because the company thought it would be able to push through further price hikes. The acquisition drove debt higher. Analysts at Santander and other banks have voiced concern that debt servicing costs may exceed cash flow in the next two years.

No comments:

Post a Comment