TEXT-S&P puts CEMEX 'B-' credit rating on watch positive
Overview -- Mexico-based cement producer CEMEX successfully executed its liability management and asset sales plan, which resulted in an extended debt maturity profile and additional liquidity. -- The company's operating performance remains on a positive trend and we expect profitability and cash flow generation to improve further in 2013. -- We are placing our ratings, including the 'B-' global scale and 'mxBB/mxB' national scale corporate credit ratings, on CEMEX on CreditWatch with positive implications. -- We expect to resolve the CreditWatch during the next 30 days, after an analysis of CEMEX's projected operating performance for 2013-2015. Rating Action On Dec. 7, 2012, Standard & Poor's Ratings Services placed its ratings, including the 'B-' global scale and 'mxBB/mxB' national scale corporate credit ratings, on CEMEX S.A.B. de C.V. and its key operating subsidiaries--CEMEX Espana S.A., CEMEX Mexico S.A. de C.V., Cemex Corp., and and CEMEX Inc.-- on CreditWatch with positive implications. Rationale The CreditWatch listing reflects CEMEX's extended debt maturity profile and additional liquidity following the successful execution of its liability management and asset sales plan. Also, it reflects the company's improved operating performance and gradual recovery in most of its major markets, resulting in sustained EBITDA growth during the past five quarters and higher operating margins. On Oct. 4, 2012, CEMEX issued $1.5 billion in bonds due 2022 to prepay principal outstanding under the new Facilities Agreement, allowing the company to satisfy the March 31, 2013, $1.0 billion payment and the Feb. 14, 2014, $500 million amortization payment, which addressed the company's short-term risk. In addition, on Nov. 6, 2012, CEMEX raised approximately $1.1 billion through the sale of a minority stake of its Central and South American operations (CEMEX Latam), excluding its Mexican operations, which further reduced the company's debt and increased liquidity. Our ratings on Cemex and its key subsidiaries are still constrained by its "highly leveraged" financial risk profile, and reflect our assessment of the company's "satisfactory" business risk profile and "adequate" liquidity. CEMEX's "satisfactory" business risk profile mainly reflects its leading position in the global cement, concrete, aggregates, and ready-mix businesses. We have equalized the ratings on CEMEX Mexico, CEMEX Inc., and CEMEX Espana because of the strategic importance of each of these subsidiaries to the group. For the nine months ended Sept. 30 2012, CEMEX's financial performance started to reflect gradual recovery in the demand for cement, particularly from the U.S. market. Also, CEMEX has been able to alleviate some of its operating pressures, through cost-reduction initiatives, resulting in EBITDA margins approaching 16%. For the 12 months ended Sept. 30, 2012, the company posted adjusted total debt to EBITDA of 8.5x, EBITDA interest coverage of 1.6x, and funds from operations to total debt of 4.8%. These ratios compare favorably with those for the same period a year earlier of 10.6x, 1.5x, and 2.1%, respectively. CreditWatch We will resolve the CreditWatch listing within the next 30 days, after completing a detailed analysis of CEMEX's projected operating performance for 2013-2015 to determine if it can achieve improved credit metrics, commensurate with a higher rating. We expect to raise the ratings by one notch, and a key factor for an upgrade will be our assessment that CEMEX can maintain its operating performance and liquidity for the next two years, even under volatile economic conditions. Related Criteria And Research -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- Use Of CreditWatch And Outlooks, Sept. 14, 2009 -- Corporate Ratings Criteria 2008, April 15, 2008 Ratings List Ratings Affirmed; CreditWatch/Outlook Action To From CEMEX S.A.B. de C.V. CEMEX Mexico S.A. de C.V. Corporate Credit Rating B-/Watch Pos/-- B-/Stable/-- Caval - Mexican Rating Scale mxBB/Watch Pos/mxB mxBB/Stable/mxB CEMEX Corp. Corporate Credit Rating B-/Watch Pos/NR B-/Stable/NR CEMEX Espana S.A. CEMEX Inc. Corporate Credit Rating B-/Watch Pos/-- B-/Stable/-- CEMEX S.A.B. de C.V. Senior Secured B-/Watch Pos B- Recovery Rating 3 3 Senior Unsecured mxBB/Watch Pos mxBB Subordinated mxB+/Watch Pos mxB+ Commercial Paper mxB/Watch Pos mxB C10 Capital Ltd. Senior Unsecured CCC+/Watch Pos CCC+ C10-EUR Capital (SPV) Limited Senior Unsecured CCC+/Watch Pos CCC+ C5 Capital Ltd. Senior Unsecured CCC+/Watch Pos CCC+ C8 Capital Ltd. Senior Unsecured CCC+/Watch Pos CCC+ CEMEX Espana S.A. Senior Secured B-/Watch Pos B- Recovery Rating 3 3 CEMEX Finance Europe B.V. Senior Unsecured B-/Watch Pos B- Recovery Rating 3 3 CEMEX Finance LLC Senior Secured B-/Watch Pos B- Recovery Rating 3 3 CEMEX Materials LLC. Senior Unsecured B-/Watch Pos B- Recovery Rating 3 3 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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