TWI – Base Case iCDS 414bps, Negative Case 817bps, 2028 7.000% Bond YTW of 7.960%, iYTW of 9.034%, B1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
June 24, 2024
- Credit markets are understating TWI’s credit risk with a YTW of 7.960% relative to an Intrinsic YTW of 9.034% and an Intrinsic CDS of 414bps. Furthermore, Moody’s is materially overstating TWI’s fundamental credit risk with its highly speculative B1 credit rating six notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights positive signals for creditors. TWI’s metrics should generally 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, management has low change-in-control compensation relative to their annual compensation. This indicates they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
