Cemex (CX) new issue 03/24/10

$500m (+75m) sub cb coming tonight from CITI. Terms: 5yr, 5.25%-5.75% up 27.5-32.5% ppctns. UOP = CB hedge, repay debt, gcp. #rd biggest cement co in world. Great recovery play. Lost IG rating in 01/09 which led to $15.1B bank refi, asset sales, $1.75N s/debt deal & aggressive cost cutting. Aim= avoid b/debt interest increases (heaviest burden of debt falls late 2012). See credit color. 9.5% 16 sec @finance opco L+525. CB is sub @holdco so we’ll back out to L+850 (assume zero reov in liq/~20 in resturcture). ADV = 980k, same delta leaps ~50iv (small OI), 2yr 50/10ile = 76/42. We’d heavily dscnt to 32 vol. Theo = 106.8. Great Play on macro turnaround although ’12 brings risk BUT mkt compensated for that. Solid as CONCRETE. READY to GET in MIX?
BUY

3rd largest cement company in the world, with capacity of 97.3 tons, #1 in ready mix concrete.
PF Cash $1.1B
PF Debt = $16.1B
LTM EBITDA = $2.6B
LTM FCF =$1.9B
Leerage 6.1x
Mkt cap = $10.6B
CX was hit hard by global downturn w/sales down by 1/3 & EBITDA down 40% since 07. CO lost inv grade rating in Jan 09 led to a $15.1B secured bank debt refinancing trans in Aug. Since then have been scrambling to repay debt w/asset sales & $1.75B secured debt deal. Have cut cost aggressively taking $900m out (some temp). Cap ex cuts allowed good FCF gen. Debt maturities will pick up late 2012 w/$1.5B due.
Our assigned spread = L+850

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