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F – CDS 227bps, Base Case iCDS 62bps, Negative Case iCDS 82bps, 2025 9.000% Bond YTW of 2.994%, iYTW of 1.494%, Ba2 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

April 23, 2021

  • CDS markets are materially overstating Ford’s credit risk with a CDS of 227bps, relative to an Intrinsic CDS of 62bps. Meanwhile, cash bond markets are overstating the firm’s credit risk with a YTW of 2.994%, relative to an Intrinsic YTW of 1.494%. 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 highlights mostly 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

F – CDS 227bps, Base Case iCDS 62bps, Negative Case iCDS 82bps, 2025 9