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F – CDS 224bps, Base Case iCDS 71bps, Negative Case iCDS 104bps, 2025 7.125% Bond YTW of 3.937%, iYTW of 2.492%, Ba2 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

March 4, 2022

  • CDS markets are materially overstating Ford’s credit risk with a CDS of 224bps relative to an Intrinsic CDS of 71bps, while cash bond markets are overstating Ford’s credit risk with a YTW of 3.937%, relative to an Intrinsic YTW of 2.492%. 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.

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