F – Base Case iCDS 116bps, Negative Case iCDS 223bps, 2031 7.450% Bond YTW of 6.814%, iYTW of 5.311%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa2) Rating from Valens, Low Refinancing Need
April 21, 2025
- Credit markets are materially overstating Ford’s credit risk with a YTW of 6.814% and a CDS of 269 bps relative to an Intrinsic YTW of 5.311% and an Intrinsic CDS of 116bp. Furthermore, Moody’s is overstating the firm’s fundamental credit risk, with its speculative Ba1 credit rating two notches below Valens’ IG4 (Baa2) credit rating.
- Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. Management’s compensation framework should incentivize them to improve all three value drivers: sales, margins, and asset utilization, which could lead to Uniform ROA expansion and increased cash flows available for obligations.
- Earning Call Forensics™ of the firm’s Q4 2024 earnings call (02/5/2025) earnings call highlights that management is confident they found the sweet spot in the US by focusing on small to medium sized trucks and SUVs, and that they have seen a normalization in ICE inventories.
