Fitch Rates Cemex’s proposed notes due 2019 ’B+/RR3’

Fitch Rates Cemex’s proposed notes due 2019 ’B+/RR3’
Published: 23 June 2011

Fitch Ratings has assigned a ’B+/RR3’ rating to Cemex’s proposed note issuance due in 2019. Proceeds from the notes are expected to be used for general corporate purposes, including the repayment of debt.

The notes will be unconditionally guaranteed by Cemex Mexico, New Sunward Holding BV, and Cemex Espana, S.A. and will be secured with a first priority interest over a collateral package consisting of substantially all of the shares of Cemex Mexico, Centro Distribuidor de Cemento, Mexcement Holdings, Corporacion Gouda, Cemex Trademarks Holding Ltd., New Sunward Holding B.V. and Cemex Espana, S.A.

The ’B’ ratings of Cemex and its subsidiary, Cemex Espana, reflect the company’s high leverage and the weak, near-term cash flow prospects for two of the company’s three key markets -- the United States and Spain. The ’RR3’ Recovery Rating (RR) on the company’s unsecured debt indicates above average recovery prospects for holders of the proposed notes in the event of default. The collateral package for the proposed notes is similar to that for the debt associated with the Aug. 14, 2009 Financing Agreement, as well as substantially all of the company’s capital markets debt.

The Positive Outlook reflects the company’s success in accessing the capital markets and refinancing its bank debt. It also reflects the very strong market positions of Cemex in its key markets, as well as the favorable demographic trends for these markets over the long term. A positive rating action could result from a signal that the company’s operations in the U.S. have hit a bottom and that the turnaround of profitability is beginning. In contrast, a negative rating action could occur, if Cemex’s sales volumes unexpectedly deteriorate in Mexico, the key source of the company’s current operating cash flow.