F – CDS 178bps, Base Case iCDS 58bps, Negative Case iCDS 76bps, 2025 9.000% Bond YTW of 2.377%, iYTW of 1.277%, Ba2 Rating from Moody’s, IG4- (equivalent to Baa2) Rating from Valens, Low Refinancing Need

August 6, 2021

  • Credit markets are materially overstating Ford’s credit risk with a CDS of 178bps and a YTW of 2.337%, relative to an Intrinsic CDS of 58bps and an Intrinsic YTW of 1.277%. Furthermore, Moody’s is overstating the firm’s fundamental credit risk, with its speculative Ba2 credit rating three notches lower than Valens’ IG4 (Baa2) credit rating
  • Incentives Dictate Behavior™ analysis highlight positive signals for credit holders. Management’s compensation metrics should focus them on all three value drivers: asset efficiency, margins, and top-line growth, leading to Uniform ROA expansion and increased cash flows available to service obligations. Additionally, management members have relatively low change-in-control compensation relative to their average annual compensation, indicating they may not be incentivized to seek an LBO or sale of the company, reducing event risk for creditors
  • Valens’ qualitative analysis of the firm’s Q2 2021 earnings call (07/28) highlights that management is confident they are focused on bringing in new retail customers