FLR – No Traded CDS, Base Case iCDS 156bps, Negative Case iCDS 278bps, 2024 3.500% Bond YTW of 1.934%, iYTW of 1.864%, Ba1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

• Credit markets are accurately stating FLR’s credit risk with a YTW of 1.934%, relative to an Intrinsic YTW of 1.864% and an Intrinsic CDS of 156bps. Meanwhile, Moody’s is overstating the firm’s fundamental credit risk, with its non-investment grade speculative Ba1 credit rating two notches lower than Valens’ IG4 (Baa2) credit rating
• Incentives Dictate Behavior™ analysis highlights favorable signals for FLR credit holders. Management’s compensation framework should drive them to focus on all three value drivers; asset efficiency, margin expansion and revenue growth, which may lead to Uniform ROA improvement and higher cash flows available for servicing obligations. In addition, management members are not well-compensated in a change-in-control scenario, indicating they are unlikely to pursue a sale or accept a buyout of the firm, limiting event risk
• Earnings Call Forensics™ of the firm’s Q1 2021 earnings call (05/07) highlights that management generated an excitement marker when saying their first strategic priority is to drive growth across all business lines, including nontraditional oil and gas. In addition, they are confident they will follow their strategic priority of fair and balanced contract terms and maintain their cash flows