MUR – Base Case iCDS 128bps, Negative Case iCDS 185bps, 2027 5.875% Bond YTW of 5.401%, iYTW of 3.541%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
- Credit markets are materially overstating MUR’s credit risk with a YTW of 5.401% and a CDS of 318bps relative to an Intrinsic YTW of 3.541% and an Intrinsic CDS of 128bps. Furthermore, Moody’s is materially overstating the company’s fundamental credit risk, with its speculative Ba3 credit rating five notches lower than Valens’ IG4+ (Baa1) credit rating.
- Incentive Dictate Behavior™ analysis highlights positive signals for creditors. 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. In addition, management members are not well-compensated in a change in control, indicating they are not sufficiently incentivized to pursue a sale or accept a buyout of the firm, reducing event risk for creditors.