Cemex is worst junk in US market on losses

Cemex is worst junk in US market on losses
Published: 28 July 2011

Bonds sold by Cemex are posting the biggest losses among major issuers of junk debt in the US after the company posted its seventh straight quarterly loss, Bloomberg reports.

Notes issued by Monterrey, Mexico-based Cemex have lost 3.5 per cent this month, compared with an average return of 1.4 per cent for the 50 biggest issuers of dollar debt rated below investment grade, according to Bank of America Corp. indexes. Yields on the company’s nine per cent bonds due in 2018 rose 122 basis points, or 1.22 percentage point, to 9.93 per cent.

Cemex bonds are slumping as a slowing expansion in the US reduces revenue and fuels concern the company will fail to meet debt level limits agreed to when it took out a US$15bn bank refinancing loan in 2009. The company struggled to drum up enough demand for a US$650m bond sale on June 23, prompting it to shelve the plan for two weeks before changing the terms and paying a premium of 97 basis points over its existing bonds.

“Everybody was afraid of bad results, and there was a loss,” Natalia Corfield, an analyst at ING Groep NV in New York, said in a telephone interview. “I’m not seeing catalysts for outperformance.”

The yield on the notes due in seven years rose 110 basis points since they first traded Jan. 5, according to prices compiled by Bloomberg. The securities yield 621 basis points more than Mexican government bonds of similar maturity, wider than the 466-basis-point gap in January.