building a STRONGER foundation - Cemex

CEMEX, S.A.B. DE C.V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements – (Continued)
As of December 31, 2010, 2009 and 2008
(Millions of Mexican pesos)
In May 2010, CEMEX exchanged, at a discount, part of each series of its perpetual debentures (note 16D) into new senior secured notes as
follows: (1) US$1,067 senior secured notes denominated in dollars maturing in May 2020, with an annual coupon of 9.25% and callable
commencing on the fifth anniversary of their issuance; and (2) €115 (US$153) senior secured notes denominated in euros maturing in May
2017, with an annual coupon of 8.875% and callable commencing on the fourth anniversary of their issuance. The senior secured notes, which
were issued by our subsidiary CEMEX España, S.A., acting through its Luxembourg branch, are fully and unconditionally guaranteed by
CEMEX, S.A.B. de C.V., CEMEX México, S.A. de C.V. and New Sunward Holding B.V, and have a pari passu over the collateral and all
proceeds of the collateral granted to the financial institutions under the Financing Agreement and other secured lenders. As a result of the
exchange, CEMEX generated a gain of approximately Ps5,401 (US$437), representing the difference between the amount of perpetual
debentures reacquired and the amount of new secured notes issued, which was recorded in “Other equity reserves.”
On March 30, 2010, CEMEX issued US$715 aggregate principal amount of 4.875% Optional Convertible Subordinated Notes due 2015,
including the full exercise of the US$65 over-allotment option granted to the initial purchasers of the notes. The 2010 Optional Convertible
Subordinated Notes are subordinated to all the Parent Company’s liabilities and commitments. The holders of the 2010 Optional Convertible
Subordinated Notes have the option to convert their notes into CEMEX’s ADSs at a conversion price per ADS 30% higher than the ADS
price at the pricing of the transaction. In connection with the offering, CEMEX entered into a capped call transaction expected to generally
reduce the potential dilution cost to CEMEX upon future conversion of the 2010 Optional Convertible Subordinated Notes (note 12C). Based
on MFRS, the 2010 Optional Convertible Subordinated Notes contain a liability component and an equity component (note 2K). The equity
component, which represents the premium of the noteholders’ call option, amounted to Ps1,232 and was recognized upon issuance within
“Other equity reserves.” As of December 31, 2010, the liability component amounted to approximately Ps7,690 (US$622). After antidilution
adjustments, the conversion rate as of December 31, 2010 was 76.4818 ADSs per each 1 thousand dollars principal amount of such 2010
Optional Convertible Subordinated Notes.
On January 13, 2010, through a reopening of the offering of its 9.5% notes due in 2016, which are described in the paragraph below, CEMEX
issued notes for an additional amount of US$500. The additional notes were issued at a price of US$105.25 per US$100 principal amount plus
accrued interest from December 14, 2009 with a yield to maturity of 8.477%. CEMEX used approximately US$411 of the net proceeds to prepay
principal due in 2011 under the Financing Agreement, and the difference was used for general corporate purposes. The original and additional
notes are guaranteed by several of CEMEX’s operating subsidiaries.
In December 2009, CEMEX issued U.S. dollar-denominated notes for US$1,250, maturing in 7 years with an annual coupon of 9.5%, as well
as euro-denominated notes for €350 (US$501), maturing in 8 years with an annual coupon of 9.625%. The proceeds obtained from the
offerings were mainly used to prepay principal outstanding maturing in 2011 under the Financing Agreement.
In December 2009, CEMEX completed its offer to exchange CBs issued in Mexico with maturities between 2010 and 2012, into mandatorily
convertible securities (“Mandatorily Convertible Securities”) for approximately Ps4,126 (US$315). Reflecting antidilution adjustments, at
their scheduled conversion in ten years or earlier if the price of the CPO reaches approximately Ps34.50, the Mandatorily Convertible
Securities will be mandatorily convertible into approximately 179.4 million CPOs at a conversion price of approximately Ps23.00 per CPO.
During their tenure, the Mandatorily Convertible Securities yield 10% interest payable quarterly. Holders have an option to voluntarily
convert their securities, after the first anniversary of their issuance, on any interest payment date into CPOs. Based on MFRS, the Mandatorily
Convertible Securities represent a compound instrument which has a liability component and an equity component. At December 31, 2010
and 2009, the liability component, which represents the net present value of interest payments on the principal amount, without assuming any
early conversion, amounted to Ps1,994 and Ps2,090, respectively, and was recognized within “Other financial obligations.” The equity
component, which represents the difference between the principal amount and the liability component at the beginning of the transaction for
Ps1,971, was recognized within “Other equity reserves.”
The most representative exchange rates for the financial debt are as follows:
January 27,
December 31,
2011 2010 2009
Mexican pesos per dollar........................................................................................ 12.04 12.36 13.09
Euros per dollar ...................................................................................................... 0.7302 0.7499 0.6985
Changes in consolidated debt for the years ending December 31, 2010, 2009 and 2008 are as follows:
2010 2009 2008
Debt at beginning of year .................................................................................. Ps 211,144 258,074 216,895
Proceeds from new debt instruments.............................................................. 20,026 40,223 59,568
Debt repayments............................................................................................. (29,641) (76,035) (63,179)
Issuance of debt in exchange for perpetual notes ........................................... 15,437 – –
Exchange of debt into convertible securities.................................................. – (4,126) –
Decrease from business combinations............................................................ – – (776)
Foreign currency translation and inflation effects .......................................... (14,148) (6,992) 45,566
Debt at end of year ............................................................................................ Ps 202,818 211,144 258,074
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