MUR – Base Case CDS 223bps, Base Case iCDS 160bps, Negative Case iCDS 265bps, 2028 6.375% Bond YTW of 6.542%, iYTW of 5.605%, Ba2 Rating from S&P, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
June 26, 2023
- Cash bond markets are overstating MUR’s credit risk with a YTW of 6.542% relative to an Intrinsic YTW of 5.605%, while CDS markets are slightly overstating credit risk, with a CDS of 223bps relative to an Intrinsic CDS of 160bps. Furthermore, Moody’s is overstating MUR’s fundamental credit risk with its speculative Ba2 credit rating four notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. MUR’s compensation metrics should generally drive management to focus on improving margins and asset utilization, which could lead to Uniform ROA expansion and increased cash flows available for obligations going forward. Additionally, management members are material owners of MUR equity relative to their average annual compensation, indicating they are well-aligned with shareholders for long-term value creation.
