GM – Traded CDS 171bps, Base Case iCDS 64bps, Negative Case iCDS 70bps, 2027 4.200% Bond YTW of 4.658%, iYTW of 3.598%, Baa3 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

August 23, 2022

  • Credit markets are overstating GM’s credit risk with a YTW of 4.658% and a CDS of 171bps relative to an Intrinsic YTW of 3.598% and an Intrinsic CDS of 64bps.
  • Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management’s compensation metrics should focus them all on three value drivers: asset efficiency, margins, and top-line growth, leading to Uniform ROA expansion and increased cash flows available to service debt obligations. In addition, while most management members are not material owners of GM equity relative to their annual compensation, CEO Barra’s significant holdings indicate she can likely persuade other NEOs to align with shareholders for long-term value creation.
  • Valens qualitative analysis of GM’s Q2 2022 (07/26/2022) earnings call highlights that management generated an excitement marker when saying they are focused on long-term supply partnerships. Meanwhile, they are confident US dealer inventory remains tight at around 250,000 units, with a large portion in transit.

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