EM LATAM CREDIT: S&P Hybrid Methodology Change Triggers Drop in Cemex 9.125 Perp
Cemex (CEMEX; -/BBB-/BBB-)
CEMEX 9.125% Perpetual Subordinated (CEMEX; -/BB/BB)
“X-S&PGR: Corporate Hybrids Possibly Affected By Criteria Update” - BBG
• The CEMEX 9.125% Perps fell 1.75 points today as there was market concern that a special redemption event might be triggered based on a ratings methodology change covenant for hybrid securities. Prior to today bonds had been trading between $102.63 and $103.66, last quoted $101.83 according to Bloomberg.
• Standard & Poor’s announced that they are changing their methodology regarding how much equity treatment to give to hybrid issues. Mexico and Uruguay are for now excluded from the methodology change until regulators complete their registration process.
• The next step would be for Cemex to certify in a notice to the trustee that due to this change in hybrid capital methodology by S&P, a rating methodology event has occurred. According to our reading of the indenture, the redemption price equals 101% of the principal amount of the notes to be redeemed if the date fixed for redemption falls prior to the First Call Date, which in this case is March 2028.
CEMEX 9.125% PERP, $101.83, -1.83