TEX – Traded CDS 182bps, Base Case iCDS 138bps, Negative Case 316bps, 2029 5.000% Bond YTW of 6.402%, iYTW of 5.682%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

February 27, 2024

  • Credit markets are slightly overstating TEX’s credit risk with a YTW of 6.402% relative to an Intrinsic YTW of 5.682%, and a CDS of 182bps relative to an Intrinsic CDS of 138bps. Furthermore, Moody’s is materially overstating TEX’s fundamental credit risk with its highly speculative Ba3 credit rating five notches below Valens’ IG4+ (Baa1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. TEX’s metrics should generally drive management to focus on all three value drivers: margins expansion, asset efficiency, and revenue growth. Moreover, all members of 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 firm. Additionally, most management members have low change-in-control compensation relative to their average annual compensation, indicating they may not be incentivized to pursue a takeover or accept a buyout of the company, decreasing event risk for creditors.
  • Earnings Call Forensics™ of the firm’s Q4 2023 (2/9/2024) earnings call highlights that management is confident aerial work platform revenue increased 18%, that their EPS improved by 75%, and that they are pursuing M&A opportunities to strengthen their business.

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