SITC – Base Case CDS 191bps, Base Case iCDS 312bps, Negative Case iCDS 356bps, 2027 4.700% Bond YTW of 4.823%, iYTW of 5.793%, Baa3 Rating from Moody’s, HY2 (equivalent to B2) Rating from Valens, High Refinancing Need

August 9, 2022

  • Credit markets are understating credit risk with a cash bond YTW of 4.823% and a CDS of 191bps relative to an Intrinsic YTW of 5.793% and an Intrinsic CDS of 312bps. Furthermore, Moody’s is materially understating the firm’s fundamental credit risk, with its Baa3 credit rating five notches higher than Valens’ HY2 (B2) credit rating.

  • Incentives Dictate Behavior™ analysis highlights that SITC’s management compensation framework is mostly positive for credit holders. That said, management members have high change-in-control compensation relative to their annual compensation, indicating that management may be incentivized to pursue a takeover or accept a sale of the company, increasing event risk for creditors.

  • Earnings Call Forensics™ of the firm’s Q2 2022 earnings call highlights that management may be overstating the attractiveness of their anchor properties in Charlotte. Furthermore, management may lack confidence in their ability to source attractive acquisitions and they may be concerned about the lack of assets coming to market.

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