Credit markets are overstating HLX’s credit risk with a YTW of 7.641% relative to an Intrinsic YTW of 6.422% and an Intrinsic CDS of 258bps. Furthermore, Moody’s is materially overstating HLX’s fundamental credit risk with its Ba3 credit rating five notches below Valens’ IG4+ (Baa1) credit rating.

Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management’s compensation framework should incentivize them to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing debt obligations going forward. Moreover, management members, including CEO Kratz are material owners of HLX equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long term value creation for the company.