S&P puts Cemex ratings on Watch Positive

S&P Global Ratings has placed its 'BB-' global scale and 'mxA-/mxA-2' national scale ratings on Cemex on CreditWatch with positive implications. The recovery rating on all Cemex's rated senior debt remains at '3', which indicates that bondholders can expect a meaningful (50-70 per cent, in the higher band of the range) recovery in the event of a payment default.
 
S&P writes: "Following our 30 January 2017 upgrade of Cemex, our base-case scenario assumed that the company would remain committed to its deleveraging plan, which would bring its debt to EBITDA below 5.0x, despite headwinds stemming from sluggish macroeconomic growth and volatile exchange rates in emerging markets where the company participates.
 
"However, during the first quarter 2017, Cemex posted significantly stronger credit metrics relative to our expectations, with debt to EBITDA reaching 4.6x and funds from operations (FFO) to debt in the 12 per cent area, which already reflects a US$470m debt repayment the company made through proceeds from
its asset divestment plan."
 
The rating's agency also notes that Cemex has announced that certain holders of its convertible notes due 2018 are expected to convert approximately US$325m, resulting in an additional debt reduction that S&P hadn't considered under our base-case scenario. "Based on its strong record of proactive debt management, we also expect Cemex to extend its debt maturity profile and reduce the cost of debt,
which should further support the expected financial improvement," it adds.