MUR – Base Case CDS 379bps, Base Case iCDS 136bps, Negative Case iCDS 164bps, 2027 5.875% Bond YTW of 7.620%, iYTW of 5.290%, BB Rating from S&P, IG4+ (equivalent to BBB+) Rating from Valens, Low Refinancing Need
October 5, 2022
- Credit markets are materially overstating MUR’s credit risk with a YTW of 7.620% and a CDS of 379bps, relative to an Intrinsic YTW of 5.290% and an Intrinsic CDS of 136bps. Furthermore, S&P is overstating MUR’s fundamental credit risk with its highly speculative BB credit rating four notches below Valens’ IG4+ (BBB+) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. MUR’s compensation framework incentivizes management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward. Furthermore, most management members are material owners of MUR equity relative to their average annual compensation, indicating that they are well-aligned with shareholders to pursue long-term value creation for the company.
