Cemex has scrapped a US$650m bond offering today as Europe’s debt crisis eroded demand for higher-yielding debt and undermined the company’s efforts to refinance bank loans.
The company pulled the sale of eight-year bonds because of “volatility” in global markets, said Jorge Perez, a spokesman for the company. The yield on Cemex’s benchmark dollar bonds due in 2020 jumped 40 basis points, or 0.40 percentage point, to 9.74 per cent at 5pm. New York time, the highest since October. The extra yield investors demand to own emerging-market corporate debt instead of US. Treasuries widened 9 basis points to 330, according to JPMorgan Chase & Co.
Cemex, battered by a slowdown in the U.S, its biggest foreign market, had planned to sell the bonds to repay debt stemming from a US$15bn bank loan refinancing in 2009 that helped it avoid default. The company needs to pay back US$200m of debt by year-end to prevent the interest rate on US$7.6bn of loans from rising by 50 basis points.
“The underlying tone that Greece has created and the follow-on risk avoidance behavior has made it more difficult for higher-yielding companies to sell bonds,” Michael Roche, an emerging-market strategist at MF Global in New York, said. “Investors are pausing right now to go through their portfolios and evaluate their holdings.”
The company was offering the bonds to yield 9.5 per cent, said a source. The notes would have yielded about 581 basis points more than Mexican government notes due in 2019, according to data compiled by Bloomberg. Similar-maturity bonds sold by Holcim yield 4.70 per cent.
“Given the current volatility and unfavorable performance of markets, we have decided not to pursue the transaction,” Perez said in a telephone interview with Bloomberg. “We were prepared to access the debt capital markets in order to continue addressing maturities ahead of schedule.”