MTDR – Traded Base Case iCDS 162bps, Negative Case iCDS 242bps, 2026 5.875% Bond YTW of 7.299%, iYTW of 5.619%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
March 21, 2023
- Credit markets are materially overstating MTDR’s credit risk with a YTW of 7.299% relative to an Intrinsic YTW of 5.619% and an Intrinsic CDS of 162bps. Furthermore, Moody’s is materially overstating MTDR’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. MTDR’s metrics should focus management on all three value drivers: margin expansion, asset efficiency, and revenue growth, which should lead to higher Uniform ROA and additional cash flow available to service debt obligations. Moreover, most management members are material owners of MTDR equity relative to their annual compensation, indicating they are well-aligned with shareholders in terms of long-term value creation.
