PARA – Base Case iCDS 45bps, Negative Case iCDS 108bps, 2028 3.375% Bond YTW of 5.201%, iYTW of 3.950%, Baa2 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
October 4, 2024
- Credit markets are overstating PARA’s credit risk with a YTW of 5.201% relative to an Intrinsic YTW of 3.950% and a CDS of 144bps relative to an Intrinsic CDS of 45bps.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management’s compensation metrics should drive them to focus on all three value drivers: margin expansion, asset efficiency, and top-line growth, which should lead to Uniform ROA expansion and increased cash flows available for servicing obligations. Additionally, management has low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
