building a STRONGER foundation - Cemex
building a STRONGER foundation - Cemex
building a STRONGER foundation - Cemex
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Our Perpetual Debentures<br />
As of December 31, 2008, 2009 and 2010, non-controlling interest stockholders’ equity included approximately U.S.$3,020<br />
million (Ps41,495 million), U.S.$3,045 million (Ps39,859 million) and U.S.$1,320 million (Ps16,310 million), respectively,<br />
representing the principal amount of perpetual debentures. These debentures have no fixed maturity date and do not represent a<br />
contractual payment obligation for us. Based on their characteristics, these debentures, issued through special purpose vehicles, or<br />
SPVs, qualify as equity instruments under MFRS and are classified within non-controlling interest as they were issued by consolidated<br />
entities, considering that there is no contractual obligation to deliver cash or any other financial asset, the debentures do not have any<br />
maturity date, meaning that they were issued to perpetuity, and we have the unilateral right to defer indefinitely the payment of<br />
interest due on the debentures. The classification of the debentures as equity instruments for accounting purposes under MFRS was<br />
made under applicable International Financial Reporting Standards, or IFRS, which were applied to these transactions in compliance<br />
with the supplementary application of IFRS in Mexico. Issuance costs, as well as the interest expense, which is accrued based on the<br />
principal amount of the perpetual debentures, are included within “Other equity reserves” and represented expenses of approximately<br />
Ps1,624 million in 2010, Ps2,704 million in 2009 and Ps2,596 million in 2008. The different SPVs were established solely for<br />
purposes of issuing the perpetual debentures and are included in our consolidated financial statements. As of December 31, 2010, our<br />
perpetual debentures were as follows:<br />
Issuer Issuance Date<br />
117<br />
Nominal<br />
Amount<br />
(in millions)<br />
Nominal<br />
Amount<br />
Outstanding<br />
as of<br />
December 31,<br />
2010<br />
(in millions) Repurchase Option<br />
C5 Capital (SPV) Ltd (1). .......................................... December 2006 U.S.$350 U.S.$146.9 Fifth anniversary 6.196%<br />
C8 Capital (SPV) Ltd................................................. February 2007 U.S.$750 U.S.$368.9 Eighth anniversary 6.640%<br />
C10 Capital (SPV) Ltd............................................... December 2006 U.S.$900 U.S.$448.9 Tenth anniversary 6.722%<br />
C10-EUR Capital (SPV) Ltd. .................................... May 2007 €730 €266.1 Tenth anniversary 6.277%<br />
(1) If we do not exercise our repurchase option by December 31, 2011, the annual interest rate of this series will change to 3-month<br />
LIBOR plus 4.277%, which will be reset quarterly. Interest payments on this series will be made quarterly instead of semiannually.<br />
We are not permitted to call these debentures under the Financing Agreement. As of December 31, 2010, 3-month<br />
LIBOR was approximately 0.30%.<br />
For a description of the 2011 Private Exchange, see “Item 3 — Key Information —Summary of our Recent Financial History.”<br />
Under U.S. GAAP, these perpetual debentures are recognized as debt and interest payments are included as financing expense,<br />
as part of the comprehensive financial result in the statement of operations.<br />
As described below and in note 12C to our financial statements included elsewhere in this annual report, there were derivative<br />
instruments associated with the debentures issued by C5 Capital (SPV) Limited, C8 Capital (SPV) Limited, C10 Capital (SPV)<br />
Limited and C10-EUR Capital (SPV) Limited through which we have changed the risk profile associated with interest rates and<br />
foreign exchange rates in respect of these debentures. In order to eliminate our exposure to Yen and to Yen interest rates, on May 22,<br />
2009, we delivered the required notices under the documentation governing the dual-currency notes and the related perpetual<br />
debentures, informing debenture holders our decision to exercise our right to defer by one day the scheduled interest payment<br />
otherwise due and payable on June 30, 2009. As a result, during July 2009, the interest rate on the dual-currency notes converted from<br />
a Yen floating rate into a Dollar or Euro fixed rate, as applicable, as of June 30, 2009, and the associated Yen cross-currency swap<br />
derivatives were unwound, and the notes trustees received approximately U.S.$94 million that are being used to pay future coupons on<br />
the perpetual debentures, as adjusted by the 2010 Exchange Offer. After certain coupon payments, as of December 31, 2010 and 2009,<br />
the balance of the investment placed with the trustees amounted to approximately Ps902 million (U.S.$73 million) and Ps1,011<br />
million (U.S.$77 million), respectively.<br />
Our Receivables Financing Arrangements<br />
Our subsidiaries in Spain, the United States, Mexico and France have established sales of trade accounts receivable programs<br />
with financial institutions, referred to as securitization programs. Through the securitization programs, our subsidiaries effectively<br />
surrender control, risks and the benefits associated with the accounts receivable sold; therefore, the amount of receivables sold is<br />
recorded as a sale of financial assets and the balances are removed from the balance sheet at the moment of sale, except for the<br />
amounts that the counterparties have not paid, which are reclassified to other accounts receivable. See notes 5 and 6 to our<br />
consolidated financial statements included elsewhere in this annual report. The balances of receivables sold pursuant to these<br />
securitization programs as of December 31, 2008, 2009 and 2010 were Ps14,667 million (U.S.$1,068 million), Ps9,624 million<br />
Interest<br />
Rate