AMKR – Traded CDS 205bps, Base Case iCDS 138bps, Negative Case iCDS 207bps, 2027 6.625% Bond YTW of 6.130%, iYTW of 4.350%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

August 16, 2022

  • Cash bond markets are materially overstating credit risk with a YTW of 6.130% relative to an Intrinsic YTW of 4.350%, while CDS markets are slightly overstating credit risk with a CDS of 205bps relative to an Intrinsic CDS of 138bps. 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 them to improve margins and grow the business, potentially leading to Uniform ROA expansion. Moreover, while most management members are not material owners of AMKR’s equity relative to their annual compensation, CEO Rutten’s significant holdings indicate he may influence other NEOs to align with shareholders and pursue long-term value creation for the firm. Lastly, management members have low change-in-control compensation relative to their annual compensation, indicating they are unlikely to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
  • Earnings Call Forensics™ of the firm’s Q2 2022 earnings call (8/1) highlights that management is confident their strategic focus and leadership position in key semiconductor markets will continue to drive future growth and that growth in the wirebond business will continue into the fourth quarter. Moreover, they are confident the QualityFIRST program is widely deployed in the organization and will further improve supply reliability through collaboration with supply chain partners.

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