Cemex SAB de CV (ADR) (NYSE:CX) has announced that it will exercise $200 million of its underlying Contingent Convertible Units through a Note Purchasing Program. The convertibles were issued in October of 2014 and the new convertibles will be issued with a due date of 2020. The proceeds will be used to pay off Cemex’s convertible notes that come due this year, at a rate of 4.875%. The interest ratio is 1.77% which is based on the 5-year swap rate set in March of 2015. This will be added to a spread of 195 basis points.
The Mexican cement maker also announced its intent to create an energy division. This is in reaction to the Mexican government’s energy reforms and is intended to provide up to 5% of Mexico’s power within the next 5 years. The company has been facing large debt issues and is cutting costs dramatically. In 2007, they took over Australian rival, Rinker, for $16 billion and continue to struggle to maintain good standing on that debt. Rinker became a liability when the US housing market tanked in 2008. Cemex will invest $30 million in the new unit over the next 5 years and has named it, Cemex Energy.
The move to create the energy company is also an attempt to restore the company’s credit rating and open the door for valuable outside capital. Cemex SAB de CV (ADR) (NYSE:CX) also signed a joint venture with Pattern Energy Group, a wind project company, and intends to create up to 1,000 megawatts of renewable powered over the next 5 years. Mexico’s new mandates include a provision to ensure that at least 35% of the country’s energy is renewable by 2024. This is all in an effort to kick-start Mexico’s lagging economy and entice outside investment.
The stock is making an attempt to move over its 50 day MA at $9.71. It’s on the end of a small cup and handle formation which indicates the trading is bullish.