A pair of sell-side analysts is divided over two high-yield chemical companies. A recent issue by Huntsman Advanced Materials (HAM), the 11% notes of '10 (B2/B), traded up to 104 shortly after pricing at par last Monday. Christy Parsons, analyst at CIBC World Markets, says she would rather own the issue at 106, than a comparable credit, the Resolution Performance 9.5% notes of '10 (B2/B+). Both make epoxy resins, which are used as an adhesive. The Resolution paper also traded at 104 last week, for a yield of 8.60%. At 106, the HAM bonds would still offer a yield of 9.60%, Parsons notes. She says HAM has fairly low leverage, and is able to keep costs down because it uses many of the same raw materials as other companies in the Huntsman Group, to which it belongs.
Another sell-side analyst argues that Resolution has a much more diverse set of products, and is able to produce raw materials on its own that HAM needs to buy. He also argues that HAM has ongoing restructuring costs for the next couple of years which will not leave the company with much free cash flow. "I prefer it at par, but what do I know? People have money to put to work, and the allocations here were brutal," he says of the HAM issue.