Cemex Gets 4 Billion Euros Worth of Orders for Sale of Bonds

Cemex SAB, the world's third-largest cement maker, received orders worth 4 billion euros ($5.25 billion) for its biggest sale of euro-denominated debt, according to bankers organizing the sale.

The Monterrey-based company sold 900 million euros of 4.75 percent bonds maturing in March 2014. The debt was sold at a yield premium of 78.7 basis points more than German government bonds with a similar maturity, according to an e-mailed statement from BNP Paribas SA, one of the banks organizing the sale. A basis point is 0.01 percentage point.

Investors are buying up bonds such as Cemex that have the lowest investment grade ratings because they're offering higher spreads and better returns than AAA ranked debt. A sale of 650 million pounds ($1.27 billion) by commodities trading firm Glencore International AG yesterday, which is rated one level lower than Cemex, received orders worth 3.7 billion pounds.

``There is a lot of appetite for investment-grade companies, such as Cemex, offering a premium over government bonds,'' said Dario Pedrajo, a senior fund manager with Kapax Investment Advisers LLC in Miami.

Standard & Poor's rates Cemex's debt BBB, its second lowest investment grade ranking. Fitch Ratings ranks the debt an equivalent BBB. Both ratings firms have a negative outlook on the debt, indicating they may cut the ratings.

European corporate bonds maturing in seven to 10 years with BBB ratings pay a yield premium of 99 basis points more than government debt, according to Merrill Lynch & Co. indexes. That compares with a spread of 21 basis points for notes with similar maturities and AAA ratings.

The lower-ranked securities have returned 0.82 percent so far this year, compared with 0.06 for highest graded debt, Merrill data show.

Cemex hired Bank of America Corp., BNP Paribas SA and HSBC Holdings Plc to manage the sale of the bonds. The company has the equivalent of $3.6 billion of bonds outstanding, according to data compiled by Bloomberg.

source:www.bloomberg.com