AMKR – Traded CDS 156bps, Base Case iCDS 124bps, Negative Case iCDS 295bps, 2027 6.625% Bond YTW of 3.082%, iYTW of 2.042%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

May 18, 2021

  • Cash bond markets are overstating credit risk with a YTW of 3.082% relative to an Intrinsic YTW of 2.042%. Meanwhile, Moody’s is materially overstating AMKR’s fundamental credit risk, with its Ba3 credit rating five notches lower than Valens’ IG4+ (Baa1) rating
  • Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Management’s compensation metrics should drive management to improve margins and grow the business, potentially leading to Uniform ROA expansion. In addition, management members have low change-in-control compensation, indicating they are not well-incentivized to accept a buyout or pursue a sale of the company, reducing event risk
  • Earnings Call Forensics™ of the firm’s Q1 2021 earnings call (04/26) highlights that management is confident they have longer-term contracts with automotive customers and focus less on tactical pricing methods