MU – Base Case CDS 106bps, Base Case iCDS 46bps, Negative Case iCDS 85bps, 2027 4.185% Bond YTW of 5.395%, iYTW of 4.389%, Baa3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

July 24, 2023

  • Credit markets are overstating MU’s credit risk with a YTW of 5.395% relative to an Intrinsic YTW of 4.389%, while CDS markets are slightly overstating credit risk with a CDS of 106bps relative to an Intrinsic CDS of 46bps. In addition, Moody’s is overstating MU’s fundamental credit risk with its Baa3 credit rating, two notches below Valens’ IG4+ (Baa1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Most management members are material owners of MU equity relative to their annual compensation, indicating they should be well-aligned with shareholders for long-term value creation. In addition, most management members have low change-in-control compensation relative to their annual compensation. This indicates that they are not likely to be incentivized to pursue a takeover or accept a sale of the company, reducing event risk for creditors.

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