FLR – Traded CDS 135bps, Base Case iCDS 156bps, Negative Case iCDS 215bps, 2028 4.250% Bond YTW of 6.106%, iYTW of 5.514%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

June 27, 2023

  • Cash bond markets are slightly overstating FLR’s credit risk with a YTW of 6.106% relative to an Intrinsic YTW of 5.514%, while CDS markets are accurately stating FLR’s credit risk with a CDS of 135bps relative to an Intrinsic CDS of 156bps. Furthermore, Moody’s is overstating FLR’s fundamental credit risk with its speculative Ba1 credit rating three notches below Valens’ IG4+ (Baa1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. As a positive, management’s compensation metrics should focus them on all three value drivers; margin expansion, asset efficiency, and revenue growth, which should lead to higher Uniform ROA and more cash flow available to service debt obligations.

  • Earnings Call Forensics™ of the firm’s Q1 2023 earnings call (5/5) highlights that management generated an excitement marker when saying they’ll continue to generate cash flow that can help pay off debt. Additionally, management is confident their projects are improving the lives of oncology patients, they’ll find strategic investors for NuScale by the end of the year, and that legacy projects will have similar cash needs in 2024.

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