BA – Base Case CDS 129bps, Base Case iCDS 75bps, Negative Case iCDS 134bps, 2029 6.298% Bond YTW of 5.225%, iYTW of 4.732%, Baa3 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
October 28, 2024
- Credit markets are slightly overstating BA’s credit risk with a YTW of 5.225% and a CDS of 129bps relative to an Intrinsic YTW of 4.732% and an Intrinsic CDS of 75bps.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management’s compensation framework should drive them to focus on all three value drivers: margin expansion, asset efficiency, and top-line growth, which should lead to Uniform ROA expansion and increased cash flows available for servicing obligations. Additionally, management has no change-in-control compensation, indicating it is unlikely to be a target for a buyout or acquisition, reducing event risk for creditors.
