CEMEX S.A.B. de C.V.'s Proposed EUR400 Million Senior Secured Notes Due 2026 Rated 'BB'


MEXICO CITY (S&P Global Ratings) March 12, 2019--S&P Global Ratings assigned 
its 'BB' issue-level rating and recovery rating of '3' to CEMEX S.A.B. de 
C.V.'s (global scale: BB/Stable/--; national scale: mxA/Stable/mxA-1) €400 
million 3.125% senior secured notes due 2026. The recovery rating of '3' 
indicates that bondholders can expect a meaningful (50%-70%) recovery in the 
event of a payment default. 

CEMEX intends to use the net proceeds for general corporate purposes, 
including repaying other debt, all in accordance with the 2017 Credit 
Agreement. The notes will be secured by a first-priority security interest 
over all the shares of CEMEX México, S.A. de C.V., Cemex Operaciones México, 
S.A. de C.V., CEMEX TRADEMARKS HOLDING Ltd., New Sunward Holding B.V., and 
CEMEX España, S.A. (together, the collateral) and all proceeds of such 
collateral. CEMEX's main subsidiaries will unconditionally guarantee the 
notes, under the same terms as all of the company's other senior capital 
market debt.

RECOVERY ANALYSIS

Key analytical factors
  • We've valued CEMEX on a going concern basis, given our belief that it would continue to have a viable business model because of its leading position in the markets where it operates.
  • We use an EBITDA multiple valuation approach with a multiple of 6.0x, given the company's stronger business risk profile than of its peers, and an emergence EBITDA of $1.0 billion after a cyclicality adjustment of 10%.
Simulated default assumptions
  • Our hypothetical simulated default scenario for CEMEX assumes a sharp decline in cement demand, associated with continued weakness in residential and non-residential construction activities in the company's core markets, resulting in lower cash flow generation. In this scenario, CEMEX would face restrictions in accessing the debt capital markets to refinance its short-term maturities.
  • We assume that the company would face a payment default in 2022, given the size of debt maturities due that year.
Simplified waterfall
  • We estimate CEMEX's unadjusted gross enterprise value at $6.0 billion and we deduct 7% in related administrative expenses, given the company's complex capital structure, leading to a net enterprise value of $5.6 billion.
  • We believe that this value would provide meaningful (50%-70%) recovery prospects for the senior secured note holders. This would lead to a negligible (0%-10%) recovery for the company's subordinated debt, resulting in a two-notch rating differential relative to the company's issuer credit rating.
We work across the world

From London to San Francisco, to our home base in (Saint Helier) Jersey, we’re looking for extraordinary and creative scientists to help us drive the field forward.

AC Investment Inc. currently does not act as an equities executing broker or route orders containing equities securities. If AC Invest’s business model were to change and it begins routing non-directed orders in NMS securities, it will comply with the disclosure requirement of Rule 606.

77 Massachusetts Avenue Cambridge, MA 02139 617-253-1000 pr@ademcetinkaya.com