HXN 9 11/15/20

Hexion Inc

Credit, Industrial/Transportation


Publicly traded companies mentioned herein: Apollo Global Management LLC (APO), CARBO Ceramics Corp (CRR), The Dow Chemical Company (DOW), Hexion Inc (private co w/ public debt), Olin Corp (OLN)

Highlights

The presenter is long Hexion’s 9% November 2020 2nd lien bonds in the low 80s, following a recent refinancing, and sees the potential for a 30% total return over the next 24-36 months. He is generally optimistic about global PMIs and thinks there may be some upside left for cyclical companies that have seen a bounce in EBITDA, but many are still well below past peaks. Hexion fits this theme, as its epoxy resins and oilfield proppants businesses have been depressed and should recover. Additionally, the company recently completed a capex cycle that saw $125mm invested in three new formaldehyde sites. Fundamentally, there is the potential for Hexion’s EBITDA to return to the $600mm level (from just over $400mm, trailing 12 months) and he is comfortable sitting behind the 1st lien and 1.5s in the capital structure.

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Idea Discussion

Commentor 1 - 2 weeks ago

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