Cemex Launches US$1bn Perpetual NC5 Notes to Yield 7.2% (IPT: 7.625%)

We recommend BUY – we believe the additional yield compensates for the lower ratings and structural subordination, while improving U.S.-Mexico relations add further support to the recommendation

Cemex is launching a US$1 billion perpetual NC5 unsecured subordinated notes issuance to yield 7.2%, following an initial price talk of 7.625%. The notes are subordinated to all existing and future senior indebtedness, ranking senior only to capital stock. They are expected to be rated BB by S&P and Fitch. Proceeds are expected to be used for general corporate purposes, including the repayment of debt or other financial obligations.

The reset dates occur 5.25 years from the issue date (“First Reset Date” or “First Step-Up Date”) and every 5 years thereafter. The First Call Date is 3 months prior to the First Reset Date. Interest is fixed-rate and payable semi-annually until the First Reset Date. Thereafter, the interest will reset every 5 years to the 5-year U.S. Treasury rate plus the initial credit spread and the relevant step-up.