CIEN – Base Case iCDS 114bps, Negative Case iCDS 171bps, 2030 4.000% Bond YTW of 6.413%, iYTW of 4.683%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
May 23, 2023
- Credit markets are materially overstating CIEN’s credit risk with a YTW of 6.413% relative to an Intrinsic YTW of 4.683% and an Intrinsic CDS of 114bps. Furthermore, Moody’s is overstating the company’s fundamental credit risk, with its speculative Ba1 credit rating three notches lower than Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. As positives, most members of management are material owners of CIEN equity relative to their annual compensation indicating that they may be aligned with shareholders to pursue long-term value creation for the company. Furthermore, management has low change-in-control compensation relative to their average annual compensation indicating that they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
