Cemex Jumps as Lenders Agree to Delay Tightening Leverage Limit

  • Agreement allows company to push back requirements by one year
  • `We consider it favorable,' Banorte analyst Espitia says

Cemex SAB posted the second-biggest gain on Mexico’s benchmark stock gauge after it won approval from lenders to delay tightening leverage requirements tied to a credit agreement.

The cement maker advanced 4.4 percent to 10.99 pesos Monday after reaching its highest intraday price since November. The IPC equity index increased 0.3 percent. All seven analysts surveyed by Bloomberg recommend buying the shares.

Under the agreement with banks, Cemex will be able to push back the schedule for lowering its leverage ratio by one year and be allowed to possibly sell a minority stake in a Philippines subsidiary. Monday’s announcement comes as a relief to investors, who have sent the stock down more than 20 percent in the past 12 months as the Mexican peso’s tumble swelled the size of the company’s overseas debt obligations in local terms. 

“We consider it favorable,” Jose Itzamna Espitia Hernandez, an analyst at Grupo Financiero Banorte SAB who recommends buying the shares, said in a note to clients. “You have to remember that Cemex’s main goal is to regain its investment rating and for that reason it’ll keep looking for spending and cost efficiencies.”

Under the agreement, consolidated funded debt will remain at six times earnings before interest, depreciation, taxes and amortization through March 2017, and the ratio will decline to four times by the end of June 2020. The company will have to pay higher interest rates on some of its debt starting at the end of the year if the consolidated ratio remains above 5.5 times.

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