TWTR – CDS 189bps, Base Case iCDS 61bps, Negative Case iCDS 81bps, 2027 3.875% Bond YTW of 4.947%, iYTW of 3.397%, Ba2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

April 18, 2022

  • Cash bond markets are materially overstating credit risk, with a cash bond YTW of 4.947% relative to an Intrinsic YTW of 3.397%, while CDS markets are overstating credit risk with a CDS of 189bps relative to an Intrinsic CDS of 61bps. Meanwhile, Moody’s is also overstating TWTR’s fundamental credit risk, with its Ba2 credit rating four notches below Valens’ IG4+ (Baa1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Management has low change-in-control compensation relative to their average annual compensation, indicating they are not incentivized to accept a buyout or pursue a sale of the firm, reducing event risk. Moreover, most management members are material owners of TWTR equity, indicating they are well-aligned with shareholders for long-term value creation.
  • Earnings Call Forensics ™ analysis of the firm’s Q4 2021 earnings call (2/10) highlights that management generated an excitement marker when saying they will utilize efficient alternative fees, cash on hand, and capital markets to fund their share repurchase program.

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