CIEN – Base Case iCDS 120bps, Negative Case iCDS 176bps, 2030 4.000% Bond YTW of 6.422%, iYTW of 5.392%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

August 17, 2023

  • Credit markets are materially overstating CIEN’s credit risk with a YTW of 6.442% relative to an Intrinsic YTW of 5.392% and an Intrinsic CDS of 120bps. 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.
  • Earnings Call Forensics™ of CIEN’s Q2 2023 (6/06/2023) call highlights that management is confident they will make WaveLogic 6 available to use with third-party solutions and that they are engaged with most of their customers in terms of network replacement. In addition, they are confident they are adding multilayer administration capabilities to their Blue Planet portfolio to help customers recognize convergence.

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