OTEX – No Traded CDS, Base Case iCDS 169bps, Negative Case iCDS 262bps, 2026 5.875% Bond YTW of 4.027%, iYTW of 2.507%, Ba1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

April 5, 2021

  • Credit markets are materially overstating credit risk, with cash bond YTW of 4.027% relative to an Intrinsic YTW of 2.507% and an Intrinsic CDS of 169bps. 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™ highlights mostly positive signals for credit holders. Management’s compensation framework should drive them to focus on all three value drivers; asset efficiency, margin expansion, and revenue growth, which should lead to Uniform ROA improvement and higher cash flows available for servicing obligations. In addition, management members are material holders of OTEX equity relative to their annual compensation indicating they may be well-aligned with shareholders for long-term value creation
  • Earnings Call Forensics™ of the firm’s Q2 2021 earnings call (2/5) highlights that management is confident Carbonite created value for their multichannel global platform and that they are well-positioned to capitalize on digitization trends