Certainly Mexican cement producer Cemex (CX) isn’t out of the woods yet, but the trees sure look a lot less menacing.
The company wound up buried under cord upon cord of debt, thanks to an aggressive acquisition strategy that culminated in the 2007 purchase of Rinker, an Australian supplier of building materials, for $14.2 billion.
Shortly after that, well, you know what happened. The collapse of the U.S. housing market decimated demand for cement and other building supplies, and the financial crisis put the squeeze on debt-laden companies.
Cemex sold off some assets, but when you’re carrying $18 billion in debt (or $21 billion by U.S. standards), it’s hard to make a big dent unless you’re willing to sell off some of your best assets. That Cemex hasn’t been willing to do. The company has stubbornly held onto the U.S. operations it acquired in the Rinker deal. Those were the reason for doing the deal in the first place.
It now looks like Cemex is going to get some breathing room from its bank creditors. They’ve agreed to restucture about $15 billion of the company’s debt. “Restructure” doesn’t mean “forgive.” And Cemex will have to pay off this debt down the road and at a higher interest rate.
But the deal, and we don’t know the terms yet, gives the company time to wait for a recovery in the U.S. construction industry.