CC – CDS 267bps, Base Case iCDS 138bps, Negative Case iCDS 203bps, 2027 5.375% Bond YTW of 6.223%, iYTW of 4.133%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
- Cash bond markets are materially overstating CC’s credit risk with a YTW of 6.223%, relative to an Intrinsic YTW of 4.133%. Meanwhile, CDS markets are overstating CC’s credit risk with a CDS of 267bps relative to an Intrinsic CDS of 138bps. 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 members of management are material holders of CC equity relative to their annual compensation, indicating they may be well-aligned with shareholders for long-term value creation.