S&P puts Cemex on negative watch

Standard & Poor's said it placed the BBB long-term corporate credit ratings of Mexico-based Cemex SA de CV and its key operating subsidiaries Cemex Espaņa SA, Cemex Mexico SA de CV and Cemex Inc. on CreditWatch with negative implications. Cemex's BBB notes due 2009 were also placed on negative watch.

The rating action follows the announcement of Cemex's intention to acquire Rinker Group Ltd. (BBB+/stable/A-2) through a 100% debt-financed transaction valued at $12.8 billion.

S&P said the CreditWatch placement reflects the uncertainty regarding the group's ability to continue to deliver financial performance consistent with current expectations given the potential for a sharp increase in the group's debt leverage. Also, the announcement represents an important test to the agency's belief that Cemex's financial policies are now moderately aggressive.

Notwithstanding the above-mentioned factors, the transaction is consistent with the group's historical preference to debt-finance major acquisitions, the agency noted. Management's commitment to restore its financial flexibility within 24 months of the acquisition is also consistent with S&P's expectation that major acquisitions will be followed by a period of debt reduction to recover financial flexibility.

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