EXPE Valens Credit Analysis – CDS 469bps, Base Case iCDS 169bps, Negative Case iCDS 366 bps, 2024 4.500% Bond YTW of 11.690%, iYTW of 2.070%, Baa3 Rating from Moody’s, IG3+ (equivalent to A1) Rating from Valens, Low Refinancing Need

• Credit markets are grossly overstating credit risk, with a cash bond YTW of 11.690% and a CDS of 469bps, relative to an Intrinsic YTW of 2.070% and an Intrinsic CDS of 169bps. Meanwhile, Moody’s is materially overstating the firm’s fundamental credit risk, treating EXPE as a cross-over credit, with its Baa3 rating five notches lower than Valens’ IG3+ (A1) rating
  
• Incentives Dictate BehaviorTM analysis highlights that although most management members do not own substantial EXPE equity relative to their annual compensation, Chairman Diller’s significant holdings may lead him to influence other NEOs to align with shareholders for long-term value creation. Moreover, management members have low change-in-control compensation, indicating they are not well incentivized to seek a sale or accept a buyout of the company, reducing event risk for creditors
  
• EXPE currently trades at historical lows relative to Uniform Assets, with a 1.4x Uniform P/B (V/A’). At these levels, the market is pricing in expectations for Uniform ROA to fall from 14% in 2019 to 8% through 2023, accompanied by 2% Uniform Asset growth going forward.