One sell-side analyst says investors should buy the bonds of Texas Petrochemical, while another is holding out to see whether the company succeeds in renegotiating its bank agreement.
The specialty chemical producer's 11.125% notes of '06 (Caa1/CCC+) have dropped some 20 points since mid-September on concerns over whether it will be able to refinance its bank agreement, according to Christy Parsons, high-yield analyst at CIBC World Markets. Parsons argues that Texas Petrochemical has a 75-80% chance of reaching an agreement with its banks. If that is completed, she sees the bonds rising to the 60s. Though one of the company's major products, a gasoline additive called MTBE, is being phased out in California, and is taking longer than anticipated, she says. Further, Parsons argues that Texas Petrochemical can convert its capacity to a replacement fuel additive for minimal cap ex.
Another analyst wants to see what happens with Texas Petrochemical's banks, and declines to say what outcome he expects. However, if the company can complete its refinancing, "it will alleviate the major concern I have and continue to hear from investors," he says.