SOVEREIGN DEBT RESTRUCTURING | MASTERCLASS

A deep dive masterclass on sovereign debt restructuring, to be conducted virtually by Asian high yield bond expert Florian Schmidt.

30 June 2022 (Thu), 5pm Singapore/HK time

Mexican cement producer Cemex rating was upgraded to BB+ from BB by Fitch with a stable outlook. Fitch notes that Cemex has strong operational performance alongside its asset sale progress. The company has been implementing a debt reduction and has also improved its debt profile in terms of maturity, financial cost, and collateral basis, Fitch noted. Cemex’s adjustable net debt came down to $7.9bn in 2021 from $10.2bn in 2019. Debt reduction last year was led by ~$550mn sale of carbon credits, strong free cash flows, and issuance of $500mn equity credit (Term of the Day, explained below) from a hybrid security in June 2021.  The rating agency has projected Cemex’s net leverage to be 3.1x in 2022 and 2.8x in 2023. Net debt/EBITDA ratios are set to go below 3.5x over the next 2-3 years. The company has a major presence in Mexico, the US, and European markets. Mexico’s contributes 40% to its EBITDA while the US has a 27% contribution.  Fitch estimates median EBITDA for 2023-24 at $2.7bn levels while it is expected to be at the same levels in 2022 as it was last year, at $2.5bn. For 2020 and 2021 free cash flow was stronger at $674mn and $771mn on higher EBITDA cash conversion, capex reduction, and foregone dividends. For 2022, it is expected to decline to $53mn due to higher operating costs, working capital, and capex. As per Fitch for 2023 and 2024, free cash flows are projected at $187mn and $390mn respectively.  

Cemex’s dollar bonds were trading lower with its 3.875% 2031s down over 5.16 points to 77.57 yielding 7.30%.

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