MAT – CDS 232bps, Base Case iCDS 127bps, Negative Case iCDS 201bps, 2026 3.375% Bond YTW of 2.306%, iYTW of 2.086%, Ba2 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

May 20, 2021

  • CDS markets are overstating risk with a CDS of 232bps relative to an Intrinsic CDS of 127bps. Moody’s is also overstating MAT’s fundamental credit risk with its Ba2 credit rating three notches below Valens’ IG4 (Baa2) credit rating
  • Incentive Dictates Behavior™ analysis highlights mixed signals for credit holders. Management’s compensation framework should drive them to focus on improving all three value drivers: margins, top-line growth, and asset utilization, which should lead to Uniform ROA improvement and higher cash flows available for servicing obligations
  • Earnings Call Forensics™ analysis of the Q1 2021 earnings call (4/22) highlights that management is confident their adjusted operating income improved to $28 million this quarter and that they are strengthening their position in the toy industry following their third consecutive quarter of market share gains