UAA – Traded CDS 357bps, Base Case iCDS 131bps, Negative Case iCDS 197bps, 2026 3.250% Bond YTW of 6.812%, iYTW of 4.319%, Ba2 Rating from Moody’s, IG4+ (equivalent to Baa2) Rating from Valens, Low Refinancing Need

July 26, 2022

  • Credit markets are materially overstating credit risk, with a cash bond YTW of 6.812% and a YTW of 357bps relative to an Intrinsic YTW of 4.319% and an Intrinsic CDS of 131bps. 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. Founder Plank and Interim President Browne are material owners of UAA equity relative to their annual compensation, indicating they could persuade other NEOs to align with shareholders to pursue long-term value creation for the company. Moreover, most management members have low change-in-control compensation relative to their annual average compensation, indicating they are less likely to pursue a takeover or sale of the company, reducing event risk for creditors.

  • Earnings Call Forensics™ of the firm’s Q1 2022 earnings call (5/6) highlights that management is confident they saw lower promotional activity within their DTC business, and they expect mid-single digit revenue growth in North America.

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