building a STRONGER foundation - Cemex

On August 14, 2009, we entered into the Financing Agreement. The Financing Agreement extended the maturities of
approximately U.S.$15.1 billion in syndicated and bilateral bank and private placement obligations, providing for a semi-annual
amortization schedule, with a final amortization payment of approximately U.S.$6.8 billion on February 14, 2014, based on prevailing
exchange rates as of December 31, 2010.
As of December 31, 2010, after giving pro forma effect to (1) the issuance of the January 2011 Notes, the 2011 Optional
Convertible Subordinated Notes and the April 2011 Notes, (2) the 2011 Prepayments and (3) the 2011 Private Exchange, we had
approximately Ps208,100 million (U.S.$16,837 million) of total debt, not including approximately Ps14,342 million (U.S.$1,160
million) of Perpetual Debentures, which are not accounted for as debt under MFRS but are considered to be debt for purposes of U.S.
GAAP. As of December 31, 2010, after giving pro forma effect to (1) the issuance of the January 2011 Notes, the 2011 Optional
Convertible Subordinated Notes and the April 2011 Notes and (2) the 2011 Prepayments, our indebtedness under the Financing
Agreement was approximately Ps92,271 million (U.S.$7,465 million), and our other debt not subject to the Financing Agreement,
which remains payable pursuant to its original maturities, was approximately Ps115,829 million (U.S.$9,372 million). As of
December 31, 2010, after giving pro forma effect to (1) the issuance of the January 2011 Notes, the 2011 Optional Convertible
Subordinated Notes and the April 2011 Notes and (2) the 2011 Prepayments, we had reduced indebtedness under the Financing
Agreement by approximately U.S.$7.5 billion (thereby satisfying all required amortization payments under the Financing Agreement
through December 2013), and we had an aggregate principal amount of outstanding debt under the Financing Agreement of
approximately Ps8,605 million (U.S.$696 million) maturing during 2013; and approximately Ps83,666 million (U.S.$6,769 million)
maturing during 2014. See “Item 3 — Key Information — Risk Factors — We have a substantial amount of debt maturing in the next
several years, including a significant portion of debt not subject to the Financing Agreement and, if we are unable to secure
refinancing on favorable terms or at all, we may not be able to comply with our upcoming payment obligations” for a description of
our total debt and related maturities.
As part of the Financing Agreement, we pledged the Collateral and all proceeds of such Collateral to secure our payment
obligations under the Financing Agreement and under a number of other financing arrangements for the benefit of the participating
creditors and holders of debt and other obligations that benefit from provisions in their instruments requiring that their obligations be
equally and ratably secured. In addition, the guarantors under our existing bank facilities (other than CEMEX, Inc. (one of our
subsidiaries in the United States)) have guaranteed the obligations to the participating creditors under the Financing Agreement. See
“Item 3 — Key Information — Risk Factors — We pledged the capital stock of the subsidiaries that represent substantially all of our
business as collateral to secure our payment obligations under the Financing Agreement, the Senior Secured Notes and other financing
arrangements.”
The Financing Agreement requires us to comply with several financial ratios and tests, including a consolidated coverage ratio
of EBITDA to consolidated interest expense of not less than (i) 1.75:1 for each semi-annual period beginning on June 30, 2010
through the period ending December 31, 2012 and (ii) 2.00:1 for the remaining semi-annual periods to December 31, 2013. In
addition, the Financing Agreement allows us a maximum consolidated leverage ratio of total debt (including our perpetual debentures)
to EBITDA for each semi-annual period of 7.75:1 for the period beginning on June 30, 2010 and ending June 30, 2011, decreasing to
7:00:1 for the period ending December 31, 2011, and decreasing gradually thereafter for subsequent semi-annual periods to 4.25:1 for
the period ending December 31, 2013.
On November 11, 2009, we launched an exchange offer in Mexico, in transactions exempt from registration pursuant to
Regulation S under the Securities Act, directed to holders of CBs maturing on or before December 31, 2012, in order to exchange such
CBs for mandatory convertible securities of CEMEX, S.A.B. de C.V., or the Mandatory Convertible Securities. After giving effect to
any dilution adjustments in respect of the recapitalization of earnings approved by shareholders at the 2010 shareholders’ meeting, the
conversion price for the Mandatory Convertible Securities is approximately Ps22.12 (402.3552 CPOs per Ps8,900 of principal amount
of Mandatory Convertible Securities), as of the date hereof. Under MFRS, the Mandatory Convertible Securities represent a combined
instrument with liability and equity components. The liability component, approximately Ps1,994 million as of December 31, 2010,
corresponds to the net present value of interest payments due under the Mandatory Convertible Securities, assuming no early
conversion, and was recognized under “Other Financial Obligations” in our balance sheet. The equity component, approximately
Ps1,971 million as of December 31, 2010, represents the difference between principal amount and the liability component and was
recognized within “Other equity reserves” net of commissions in our balance sheet.
On March 30, 2010, we closed the offering of U.S.$715 million of our 4.875% Convertible Subordinated Notes due 2015,
including the initial purchasers’ exercise in full of their over-allotment option, in transactions exempt from registration pursuant to
Rule 144A under the Securities Act. The conversion rate has been adjusted to 79.5410 ADSs per U.S.$1,000 principal amount of 2010
Optional Convertible Subordinated Notes, reflecting the issuance of CPOs in connection with the recapitalization of earnings
approved by shareholders at the 2010 annual shareholders’ meeting.
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