DINO – Base Case iCDS 127bps, Negative Case iCDS 177bps, 2027 6.375% Bond YTW of 7.024%, iYTW of 5.924%, Baa3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
November 16, 2023
- Credit markets are overstating DINO’s credit risk with a YTW of 7.024% relative to an Intrinsic YTW of 5.924% and an Intrinsic CDS of 127bps. Furthermore, Moody’s is overstating the firm’s fundamental credit risk, with its Baa3 credit rating two notches lower than Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management’s compensation framework should drive them to focus on all three value drivers: margins, asset efficiency, and growth, which should lead to Uniform ROA improvement and increased cash flows for servicing obligations. Additionally, most members of management have low change-in-control compensation relative to their annual compensation, indicating they may not be sufficiently incentivized to pursue a takeover or sale of the company, decreasing event risk for creditors.
