Cemex, the world’s no 3 cement maker, will sell $1.2 billion in convertible bonds after shareholders approved the unpopular plan to use the funds to repay debt. The Mexican company, which is trying to cut its $18 billion debt after narrowly avoiding default in 2009, said it plans to issue convertible subordinated notes, of which $600 million will be due in 2016 and $600 million due in 2018. The notes will convert into Cemex’s American Depositary Shares at rates yet to be determined, the Monterrey-based company said.
Analysts say the issue could eventually dilute the stock by about 5 per cent when the convertibles mature. Cemex has been struggling with debt since its ill-timed purchase of Australian cement rival Rinker, which made the Mexican company the top cement producer in the US. Just when things were moving ahead, unfortunate struck in the form of US housing crisis. Cemex has to pay its bankers $2.3 billion this year to avoid a $200 million jump in annual interest payments. The cement maker, which competes with France’s Lafarge SA and Switzerland’s Holcim AG, has yet to pull out of a slump and cannot rely on earnings to pay back debt. "Cemex intends to use the net proceeds from the offering of the notes to fund the purchase of the capped call transactions and to repay indebtedness," the company said in a statement.