TEX – Base Case CDS 265 bps, Base Case iCDS 184 bps, Negative Case iCDS 443 bps, 2029 5.000% Bond YTW of 6.900%, iYTW of 5.580%, B1 Rating from Moody’s, IG4+ (equivalent to Baa1) Ratings from Valens, Low Refinancing Need
January 4, 2023
- Credit markets are overstating credit risk with a YTW of 6.900% and a CDS of 265bps relative to an Intrinsic YTW of 5.580% and an Intrinsic CDS of 184bps. Furthermore, Moody’s is materially overstating TEX’s fundamental credit risk with its speculative B1 credit rating six notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. TEX’s metrics should drive management to focus on all three value drivers: margins, turns, and growth, which could lead to Uniform ROA expansion and increased cash flows available for obligations. Furthermore, most management are material owners of TEX equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company.
