Cemex still faces hard time after debt restructure

MONTERREY, Mexico (Reuters) - Mexico's Cemex has created breathing room with a deal to avoid defaulting on $15 billion in debt, but the world's No. 3 cement maker still faces asset sales, a beat-up credit rating and a likely share offer.

Cemex (CMXCPO.MX) (CX.N) allayed investors' biggest concerns on Friday when it announced it had reached agreement after months of talks to extend payments on the debt it had taken on to acquire Australia's Rinker in 2007.

Winning the extension until 2014 on the debt, which would have matured over the next two years, has been Cemex's main hurdle this year but the Monterrey-based company now still has to deal with slumping sales in its key U.S. market.

Cemex must sell some of its businesses as part of the debt restructure and will probably also offer investors shares to raise more cash to pay creditors.

This year, Cemex expects earnings before interest, taxes, depreciation and amortization to fall 29 percent to $3.1 billion and free cash flow to drop 38 percent to $1.6 billion.

"The company's leverage continues to be too high for the EBITDA it is generating," Santander said in a recent report.

Cemex, which has seen its long-battered stock surge around 20 percent since the end of July on expectations that it would close the debt deal, traded down 3.87 percent at 13.92 pesos on Friday after announcing it had clinched the refinancing.

SHARE OFFER EXPECTED

Cemex said as part of the deal it will use capital market transactions to help pay down its debt.

Analysts say the company is likely to offer between $1 billion and $2 billion in new shares, although it may wait for market conditions to improve.

"Knowing Cemex, they probably negotiated some sort of window to do it, which could be quite a long time," said Carlos Legaspy, president of San Diego-based Precise Investment Management, which holds Cemex bonds.

Cemex's market capitalization is about $9.5 billion, according to Reuters data.

Experts say it could take up to five years for Cemex to regain its investment grade credit rating, key to cheap financing, after being hit with downgrades in recent months.

Since last year, Standard & Poor's has cut its investment grade rating on Cemex by several notches to "B-." Fitch has also removed its investment grade rating from the company.

Rinker's U.S. assets have made Cemex the top cement maker in the United States, but the deal closed as the U.S. housing collapse struck.

Cemex, which acknowledges the Rinker purchase was ill-timed, operates in 50 countries and competes globally with Switzerland's Holcim (HOLN.VX) and France's Lafarge (LAFP.PA).

Cemex has also pledged to cut costs to improve its cash flow and to sell more of its assets.

Scrambling to raise cash, Cemex agreed in June to sell its Australian operations to Holcim at a fire-sale price of $1.6 billion, about half what it paid in 2007.

But Cemex's efforts to sell its Austrian assets faltered after Vienna-listed Strabag (STRV.VI) pulled out of a $435 million asset deal to buy Cemex units.

(Writing and additional reporting by Noel Randewich, editing by Gerald E. McCormick)