MU – Base Case CDS 152bps, Base Case iCDS 50bps, Negative Case iCDS 151bps, 2027 4.185% Bond YTW of 5.188%, iYTW of 4.192%, Baa3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
April 24, 2023
- Credit markets are overstating credit risk, with a cash bond YTW of 5.188% and a CDS of 152bps relative to an Intrinsic YTW of 4.192% and an Intrinsic CDS of 50bps. Additionally, 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.
