Cemex cement mixer

Skadden, Arps, Slate, Meagher & Flom and Cleary Gottlieb Steen & Hamilton have advised on Mexican cement giant Cemex's $1 billion global bond offering, one of the first emerging market high-yield issuances since COVID-19 was declared a global health pandemic.

Cemex is one of the largest cement and ready-mix concrete companies in the world, with operations in more than 50 countries and annual sales of $13.1 billion in 2019. The 7.375% senior secured notes due in 2027 are guaranteed by subsidiaries in Mexico, the U.S., the U.K., Spain, France, the Netherlands and Switzerland.

Skadden capital markets partner Gregory Fernicola led the deal on behalf of Cemex, while Cleary partners Duane McLaughlin and Manuel Silva represented initial purchasers BBVA, Citigroup, Credit Agricole CIB, J.P. Morgan, BofA Securities, HSBC, ING and Mizuho Securities.

The cement company, Mexico's fifth-biggest publicly traded firm by revenue, intends to use the proceeds for general corporate purposes, including to repay existing indebtedness.

Cemex began expanding outside Mexico in the 1990s, starting with other parts of Latin America before moving on geographically to become a major player in multiple developed and emerging markets. Today, the U.S. accounts for 29% of Cemex sales while Europe makes up 23% and Mexico just 22%. The company employed 40,000 people at the end of 2019.

The Great Recession put a halt to Cemex's acquisition spree, which the company had financed with leverage. In 2009, Cemex restructured $15 billion of debt and in 2012 it further restructured approximately $7 billion. Cleary has acted as counsel to initial purchasers in the issuance of approximately $20.5 billion in high-yield bonds and convertible debentures by Cemex since 2009.

Before the pandemic, Cemex had been engaged in a lengthy campaign to reduce debt and regain an investment-grade rating. Cemex announced in March that it would increase its general debt levels and open lines of credit to weather tough times amid the spread of COVID-19.

The Mexico-based firm asked employees in April to voluntarily defer payment of 10% of their salaries for three months, part of a raft of measures to combat the financial hit from the pandemic that also included scrapping 2020 dividends and share repurchases.

"Cemex anticipates that construction activity will be impacted for some time in most markets where Cemex operates," the cement maker said in April.

Cemex also said it would reduce or suspend investments unrelated to the pandemic in addition to trimming inventory in all markets, in line with weaker demand.

In Mexico, Cemex has warned that its business may suffer from recent rule changes announced for the electricity market that could limit generation of renewable energy. Mexico's energy regulator approved new rates in May that electricity providers must pay to the national power utility for transmission. A prominent business group estimates those rates are between five and 10 times higher than previous prices.