Mexico's Cemex, the world's No. 3 cement maker, said on Friday it finalized a $15 billion debt restructuring to avoid default and announced it could sell shares worth about $1.7 billion as part of the deal.
Cemex had been under immense pressure to reach a deal to extend debt it took on to finance its acquisition of Australia's Rinker in 2007.
Fears it would fail to satisfy creditors have hurt Cemex since last year when the global credit crisis made it harder for even the largest emerging market companies to borrow in dollars.
Cemex said it could sell up to 1.6 billion new CPO shares within two years to raise additional money to pay off its debt. The shares could also be issued as part of convertible bonds, Cemex said.
Bank creditors representing most of the money owed by Cemex have agreed to receive an interest rate of LIBOR plus 450 basis points on debt repaid through 2014 instead of within two years.
Private placement creditors, owed about $900 million, have agreed to be paid a fixed interest rate of 8.91 percent.
Cemex is in a much stronger financial position to regain our financial flexibility and, eventually, our investment-grade capital structure, Chairman Lorenzo Zambrano said in a statement.
Cemex, which on Monday announced its creditors backed the deal, said it would meet payment requirements using free cash flow from operations, proceeds from asset sales and capital market transactions.
Cemex's euro bond maturing in 2014 currently pays a yield of 10.49 percent, said Carlos Legaspy, president of San Diego-based Precise Investment Management, which holds Cemex bonds.
The easy money has been made, Legaspy said. You're going to start seeing a rotation out of vulture funds into high-yield players.
Cemex's stock fell 4.28 percent to end at 13.86 pesos.
It was already discounted, said Maurico Cervantes, a trader at Multivalores brokerage in Mexico City, noting a recent run-up in Cemex's stock on bets it would clinch the refinancing deal.
Cemex stock had surged more than 23 percent since July 29 on news the company was close to a deal.
For months this year, Cemex looked as if it might head toward a default as sales slumped in Europe and the United States, promised asset sales failed to materialize and the company was unable to place a $500 million international bond.
Some of the banks involved in the restructuring are New York-based Citigroup; Spain's BBVA and Santander; Europe's top bank, HSBC; and Britain's Royal Bank of Scotland.
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 and France's Lafarge.
Investment firm Lazard coordinated the restructuring agreement for Cemex.
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 pulled out of a $435 million asset deal to buy Cemex units.
($1 = 12.89 pesos)
(Reporting by Gabriela Lopez; Additional reporting by Michael O'Boyle; Writing by Noel Randewich; Editing by Gary Hill)