UAA – Traded CDS 240bps, Base Case iCDS 135bps, Negative Case iCDS 195bps, 2026 3.250% Bond YTW of 6.109%, iYTW of 5.522%, Ba2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

June 14, 2023

  • Credit markets are slightly overstating UAA’s credit risk with a YTW of 6.109% relative to an Intrinsic YTW of 5.522%, while CDS markets are overstating UAA’s credit risk with a CDS of 240bps relative to an Intrinsic CDS of 135bps. Furthermore, Moody’s is overstating UAA’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. As positives, most management are material owners of UAA equity relative to their annual compensation indicating they may be aligned with shareholders to pursue long-term value creation for the company. Furthermore, most management members have low change-in-control compensation relative to their annual compensation, indicating management is not incentivized to pursue a takeover or accept a sale of the company, thereby reducing event risk for creditors.
  • Earnings Call Forensics™ of the firm’s Q4 2023 earnings call (05/09/2023) highlights that management is confident they have products at every price point and they’re going to have a steady cadence of new products. Furthermore, they’re confident in their wholesale partner business and that they’re bringing in outside talent for collaborations. Finally, management is confident Q2 is the turning point back to growth and EMEA is the highest growth region.

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