MSCI – Base Case iCDS 92bps, Negative Case iCDS 138bps, 2029 4.000% Bond YTW of 6.013%, iYTW of 5.143%, Ba1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
December 19, 2023
- Credit markets are overstating MSCI’s credit risk with a YTW of 6.013% relative to an Intrinsic YTW of 5.143% and an Intrinsic CDS of 92bps. Meanwhile, Moody’s is overstating the firm’s fundamental credit risk, with its speculative Ba1 credit rating two notches below Valens’ IG4 (Baa2) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. MSCI’s compensation metrics incentivizes management to improve all three value drivers: margins, revenue, and asset utilization. Moreover, all members of management are material owners of MSCI equity relative to their average compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company.
- Earnings Call Forensics™ of MSCI’s Q3 2023 call highlights that management is confident they drove a 9% run rate growth in their market cap-weighted modules, a subscription run rate growth of 7% in their Analytics segment and that there are big-long term opportunities for them in ESG and Climate. Furthermore, management is confident that if AUM levels remain flat or increase, the company will be towards the high end of their expense guidance range and that Burgiss has very attractive margin dynamics which should aid in expense management.
