DVN – Base Case CDS 84bps, Base Case iCDS 60bps, Negative Case iCDS 81bps, 2028 5.875% Bond YTW of 5.629%, iYTW of 5.336%, Baa2 Rating from Moody’s, IG4+ Rating from Valens, Low Refinancing Need
June 26, 2024
- Credit markets are accurately stating DVN’s credit risk with a YTW of 5.629% relative to an Intrinsic YTW of 5.336%, and a CDS of 84bps relative to an Intrinsic CDS of 60bps.
- Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. DVN’s metrics should generally drive management to all three value drivers: margin expansion, asset utilization, and growth which could lead to Uniform ROA expansion and increased cash flows available for obligations going forward. Additionally, management members are material owners of DVN equity relative to their annual compensation, indicating they are aligned with shareholders to pursue long-term value creation for the company. Moreover, all members of management have low change-in-control compensation relative to their annual compensation. This indicates they may not be sufficiently incentivized to pursue a takeover or sale of the company, decreasing event risk for creditors.
