CC – Base Case CDS 323bps, Base Case iCDS 122bps, Negative Case iCDS 168bps, 2027 5.375% Bond YTW of 6.750%, iYTW of 4.330%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
- Credit markets are materially overstating CC’s credit risk with a YTW of 6.750% and a CDS of 323bps, relative to an Intrinsic YTW of 4.330% and an Intrinsic CDS of 122bps. Furthermore, Moody’s is materially overstating the company’s fundamental credit risk, with its speculative Ba3 credit rating five notches lower than Valens’ IG4+ (Baa1) credit rating.
- Incentive Dictate Behavior™ analysis highlights mostly positive signals for creditors. CC’s compensation framework incentivizes management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward. In addition, most management members are material owners of CC’s equity relative to their annual compensation, indicating they may be well-aligned with shareholders in pursuing long-term value creation for the company.