Debts & Loans

Giant cement producer Cemex's talks with banks to extend $6 billion in debt payments due next year are increasingly urgent after the company stumbled in a bid to lengthen maturities on $418 million in commercial paper.

Cemex, slammed by the U.S. slowdown and derivatives losses, is expected to give a forecast for fourth-quarter results on Monday, including an update on crucial negotiations with bankers to lighten its 2009 debt load.

Shares of Monterrey-based Cemex tumbled 18.74 percent on Thursday after the company swapped commercial paper for longer-term debentures worth $71 million -- less than 20 percent of what it had offered to exchange.

Cemex said in a statement it would repay on time the commercial paper that it failed to roll into debentures, but a spokesman was not available for comment on the company's overall debt situation.

"We estimate that Cemex would have to obtain a positive resolution from the banks for the deferral of at least $3.0 billion so that Cemex does not depend on asset sales to be able to meet the remaining 2009 debt maturities," Credit Suisse analyst Vanessa Quiroga said in a report.

Highly leveraged after buying Australian rival Rinker last year, Cemex has seen cash flows from its key U.S. operation wilt and has been forced to sell assets in Austria, Hungary and the Canary Islands.



The global credit debacle has torn into the value of Mexico's peso and dried up liquidity in credit markets, compounding Cemex's problems.

Cemex, the world's No. 3 cement maker, swapped new debt on Wednesday at a yield of Mexico's TIIE benchmark commercial lending rate plus 375 basis points -- much more costly than comparable issues a year ago.

"The results are frankly negative for Cemex," BBVA said in a report. "We're concerned about the brisk increase in the company's financing costs."

The company, which operates in more than 50 countries, needs to repay more than $6 billion in debt by the end of next year, compared with available cash of about $4.3 billion, according to Credit Suisse. Its total debt is $16.4 billion.

The poor result of Cemex's debt swap failed to reassure investors betting on the chances that the company could default.



The cost of insuring against a default on $10 million in Cemex debt over five years rose to $755,000 a year on Thursday from $751,250 the day before, according to Markit.

Ratings agencies Fitch and Standard and Poor's downgraded the company's credit ratings in October, raising Cemex's borrowing costs.