CIEN – Base Case iCDS 115bps, Negative Case iCDS 154bps, 2030 4.000% Bond YTW of 5.742%, iYTW of 5.080%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
August 7, 2024
- Credit markets are slightly overstating CIEN’s credit risk with a YTW of 5.742% relative to an Intrinsic YTW of 5.080% and an Intrinsic CDS of 115bps. 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 mostly negative signals for credit holders. As a positive, 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.
- Earning Call Forensics™ of the firm’s Q2 2024 earnings call (06/06/2024) highlights that management is confident they are employed by all 4 of the large network deployed cloud players and that they are well positioned to win business with non-North American cloud providers. Lastly, they are confident their coherent pluggable solutions represent an incremental business and market share growth opportunity.
