AR – Base Case CDS 73bps, Base Case iCDS 87bps, Negative Case iCDS 94bps, 2030 5.375% Bond YTW of 5.023%, iYTW of 4.421%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
December 10, 2025
- Cash bond markets are slightly overstating AR’s credit risk with a YTW of 5.023% relative to an Intrinsic YTW of 4.421%. Furthermore, Moody’s is overstating AR’s fundamental credit risk, with its Ba1 credit rating three notches lower than Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. AR’s compensation metrics framework should drive management to focus on all three value drivers, margins, asset efficiency and growth, which should lead to Uniform ROA expansion and increased cash flows to service debt obligations. In addition, most management members are material owners of AR equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company. Furthermore, management has low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.