BA – Base Case CDS 94ps, Base Case iCDS 15bps, Negative Case iCDS 27bps, 2028 3.250% Bond YTW of 4.192%, iYTW of 5.098%, Baa2 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
February 21, 2023
- Credit markets are overstating BA’s credit risk with a YTW of 5.098% and a CDS of 94bps relative to an Intrinsic YTW of 4.192% and an Intrinsic CDS of 15bps.
- Incentives Dictate Behavior™ analysis highlights 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. Furthermore, most management are material owners of BA equity relative to their annual compensation, indicating they should be aligned with shareholders to pursue long-term value creation for the company
