AMKR – Traded CDS 212bps, Base Case iCDS 150bps, Negative Case iCDS 225bps, 2027 6.625% Bond YTW of 7.014, iYTW of 6.554%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
November 14, 2022
- Cash bond markets are overstating credit risk with a YTW of 7.014% relative to an Intrinsic YTW of 5.804%, while CDS markets are slightly overstating credit risk with a CDS of 212bps relative to an Intrinsic CDS of 150bps. 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.
- Earnings Call Forensics™ of the firm’s Q3 2022 earnings call (10/31) highlights that management was negative on the potential of their global factory footprint investment and investments into quality and factory automation, and they may have concerns about the regionalization trends accelerated by the new U.S. export controls.
