BA – Base Case CDS 86bps, Base Case iCDS 14bps, Negative Case iCDS 25bps, 2028 3.250% Bond YTW of 5.273%, iYTW of 4.141%, Baa2 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
July 24, 2023
- Credit markets are overstating BA’s credit risk with a YTW of 5.273% relative to an Intrinsic YTW of 4.141%, while CDS markets are slightly overstating risk with a CDS of 86bps relative to an Intrinsic CDS of 14bps.
- 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.
