NFLX – Traded CDS 196bps, Base Case iCDS 47bps, Negative Case iCDS 59bps, 2026 4.375% Bond YTW of 4.831%, iYTW of 3.393%, Ba1 Rating from Moody’s, IG3 (equivalent to A2) Rating from Valens, Low Refinancing Need

May 24, 2022

  • Credit markets are overstating credit risk with a YTW of 4.831% and a CDS of 196bps relative to an Intrinsic YTW of 3.393% and Intrinsic CDS of 47bps. Meanwhile, Moody’s is materially overstating NFLX’s fundamental credit risk with its Ba1 credit rating five notches below Valens’ IG3 (A2) credit rating.

  • Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Management members are likely well-aligned with shareholders for long-term value creation, which is bolstered by President Hastings’ significant ownership position. In addition, management members also have low change-in-control compensation indicating they are not incentivized to pursue a buyout, and NFLX’s large market capitalization limits event risk related to a sale of the company.

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