OTEX – No Traded CDS, Base Case iCDS 153bps, Negative Case iCDS 214bps, 2026 5.875% Bond YTW of 1.867%, iYTW of 2.397%, Ba1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

• Credit markets are slightly understating credit risk, with cash bond YTW of 1.867% relative to an Intrinsic YTW of 2.397% and an Intrinsic CDS of 153bps. Meanwhile, Moody’s is overstating the firm’s fundamental credit risk, with its speculative Ba1 credit rating two notches lower than Valens’ IG4 (Baa2) credit rating
  
• Incentives Dictate Behavior™ analysis for OTEX’s management compensation framework highlights mixed signals for credit holders. Management is incentivized to focus on revenue growth and margin improvement, which could lead to Uniform ROA improvement and increased cash flows to service debt. That said, the lack of asset efficiency and debt metrics may incentivize management to overspend on assets or overleverage the balance sheet in pursuit of growth
  
• Earnings Call Forensics™ of the firm’s Q3 2021 earnings call (5/6) highlights that management may have concerns about their automotive business and US-China trade tensions. Moreover, they may be overstating the sustainability of the strength in their cloud business, and they may lack confidence in their ability to continue to improve their net leverage ratio. Finally, they may be exaggerating the capabilities of their content cloud and the strength of their fiscal outlook