CC – Traded Base Case iCDS 135bps, Negative Case iCDS 186bps, 2027 5.375% Bond YTW of 3.660%, iYTW of 2.480%, B1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

• Credit markets are overstating CC’s credit risk with a YTW of 3.660%, relative to an Intrinsic YTW of 2.480% and an Intrinsic CDS of 135bps. Furthermore, Moody’s is materially overstating the company’s fundamental credit risk, with its speculative B1 credit rating six 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. Moreover, most management members are not well-compensated in a change in control, indicating they are not incentivized to pursue a sale or accept a buyout of the firm, reducing event risk.
• Valens’ qualitative analysis of the firm’s Q3 2021 earnings call highlights that management generated an excitement marker when saying that they have used the current market tightness to sign up strategic customers they’re interested in growing with over the long-term.