Shares of Cemex fell to a more than six-week low on Monday after it said it would buy US.assets in a deal that could push it closer to breaking promises to creditors.
Last Friday, Cemex said it was forced to pick up assets in the southeastern United States from its US joint venture partner Ready Mix USA after the US firm exercised a "put" option.
Deutsche Bank cut the stock to "hold" from "buy" on the news, saying additional debt and pressure on Cemex’s cash flow from the deal would raise the likelihood the company could eventually miss debt targets it set up with creditors.
"We now see a high likelihood of Cemex breaching debt covenant ratios next year. This could trigger the need for refinancing at a higher cost and dilution potential for equity holders," wrote Esteban Polidura, a Deutsche Bank analyst in Mexico City.
Cemex’s Mexican-traded shares were down 3.07 percent at 10.1 pesos. Shares hit an intraday low of 10 pesos and were on track to close at their cheapest level since August, when the stock price hit its lowest since April 2009.
If Cemex fails to meet targets set for review this December, June 2011 and December 2011, debt holders could raise borrowing costs, demand asset sales or push for Cemex to sell more shares.