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PPC – No Traded CDS, Base Case iCDS 119bps, Negative Case iCDS 495bps, 2027 5.875% Bond YTW of 2.799%, iYTW of 2.839%, Ba3 Rating from Moody’s, HY1 (equivalent to Ba2) Rating from Valens, Low Refinancing Need

June 29, 2021

  • Credit markets are materially understating credit risk with a YTW of 1.676% relative to an Intrinsic YTW of 3.406% and Intrinsic CDS of 257bps. Meanwhile, Moody’s is materially understating PPC’s fundamental credit risk with its Baa1 credit rating seven notches higher Valens’ HY2 (B2) credit rating
  • Incentives Dictate Behavior™ analysis highlights mostly positive signals for creditors. 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, members of management are material holders of PPC equity relative to their annual compensation, indicating they may be well-aligned with shareholders for long-term value creation. Furthermore, management has low change-in-control compensation relative to their average annual compensation, indicating they may not be incentivized to accept a takeover or pursue a sale of the company