What’s the plan? Cemex parent budgets P4.3 billion to bankroll P2 billion tender offer

The parent of Cemex Holdings Philippines (CHP) has allocated up to P4.3 billion or double its budget to buy back up to 10 percent of its shares held by the public.

In a January 25 letter to the Securities and Exchange Commission, BDO Capital & Investment said CHP’s parent, Cemex Asian South East Corp., is borrowing the money from its Swiss affiliate, Cemex Innovation Holdings, to ensure that it would have sufficient cash to cover the voluntary tender offer.

The P4.3 billion revolving fund is more than double the P2.09 billion Cemex Asian will spend to buy up to 1.614 billion CHP shares at P1.30 each.

BDO Capital stressed that it does not “guarantee” or “commit” to provide any funding to Cemex Asian for its tender offer which is set to be crossed on March 29.

CHP has total loans of P10.775 billion as of 31 December 2022, of which P8.95 billion is owed to BDO Unibank.

The company has been having trouble financing its 2017 BDO loan starting in 2020 when it asked the Sy family to relax payment and debt convention terms.

In July 2022, BDO agreed to a five-year debt restructuring with CHP covering P6.68 billion owed to the bank. CHP agreed to fully pay the loan by August 2027 and start quarterly payments of the floating rate loan by November 2024.

CHP has come under heavy criticism after announcing its tender offer price which is just 12 percent of its initial public offering price in 2016 (when it raised P25.1 billion) and 16 percent below the stock rights offering price of P1.50 in 2020 (when it raised P12.8 billion).

It used part of the IPO proceeds and the BDO loan to repay the long-term loan with New Sunward Holding B.V., an indirect subsidiary of Cemex Asian which was merged with Cemex España in December 2020.

Cemex Asian has apparently decided to increase its stake to only 90 percent in the tender offer to remain eligible for listing with a minimum10 percent public float. The company, however, has not ruled out a delisting or divestment.

The tender offer should not come as a surprise to stockholders because CHP has warned investors in its annual report that Cemex “may not remain the controlling shareholder in the future.”

“The company’s business, prospects, financial condition and results of operations and the market price of the parent company’s common shares could be materially and adversely affected if CEMEX ceases to participate actively in the company’s operations,” said CHP.

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