FL – Base Case iCDS 166bps, Negative Case iCDS 222bps, 2029 4.000% Bond YTW of 7.209%, iYTW of 5.309%, Ba1 Rating from S&P, XO (equivalent to Baa3) Rating from Valens, Low Refinancing Need
May 10, 2023
- Credit markets are materially overstating credit risk, with a cash bond YTW of 7.209% relative to an Intrinsic YTW of 5.389% and an Intrinsic CDS of 166bps.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management’s compensation metrics should drive them to focus on all three-value metrics: asset efficiency, margin expansion, and revenue growth, which should lead to Uniform ROA improvement and increased cash flows available to service debt obligations. Moreover, management has low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
- Earnings Call Forensics™ of the firm’s Q3 2022 earnings call (11/18) highlights that management generated an excitement marker when saying the consumer-driven demand engine can grow their share of wallet within existing customers.
