CC – Traded CDS 389bps, Base Case iCDS 156bps, Negative Case iCDS 248bps, 2028 5.750% Bond YTW of 8.420%, iYTW of 5.720%, Ba3 Rating from Moody’s, XO (equivalent to Baa3) Rating from Valens, Low Refinancing Need
March 6, 2023
- Credit markets are grossly overstating CC’s credit risk with a YTW of 8.420% relative to an Intrinsic YTW of 5.720%, while CDS markets are materially overstating credit risk with a CDS of 389bps relative to an Intrinsic CDS of 156bps. Furthermore, Moody’s is overstating the company’s fundamental credit risk, with its speculative Ba3 credit rating three notches lower than Valens’ XO (Baa3) 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 lead to Uniform ROA expansion and increased cash flows to service debt obligations going forward. In addition, all members of management are material owners of CC equity relative to their annual compensation, indicating that they may be aligned with shareholders to pursue long-term value creation for the company.
- Earnings Call Forensics™ of CC’s Q4 2022 (2/10/2023) call highlights that management is confident they can sell semiconductor chemical applications at higher margins than the rest of their portfolio.