Credit markets are grossly overstating Avon Products, Inc.’s (NYSE:AVP) fundamental credit risk with a CDS of 848bps and a cash bond YTW of 11.680%. Our fundamental analysis highlights a far safer credit profile for AVP. Even with a poor recovery rate, the firm’s robust cash flows and healthy liquidity would be able service all their obligations including debt maturities. These drive our much safer Intrinsic CDS of 248bps and Intrinsic YTW of 3.980%.
Moreover, Moody’s is overstating Avon Products’ credit risk with their non-investment speculative, high-yield Ba3 credit rating against our IG4 (Baa2) credit rating.
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