UBER – CDS 228bps, Base Case iCDS 56bps, Negative Case iCDS 66bps, 2027 7.500% Bond YTW of 6.932%, iYTW of 4.826%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
March 9, 2023
- Credit markets are materially overstating credit risk with a YTW of 6.932% and a CDS of 228bps relative to an Intrinsic YTW of 4.826% and an Intrinsic CDS of 56bps. In addition, Moody’s is materially overstating UBER’s fundamental credit risk with its Ba3 credit rating five notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. UBER’s compensation framework should drive management to focus on all three value drivers: asset efficiency, margins, and top-line growth, which should lead to Uniform ROA expansion and increased cash flows for servicing debt obligations. Moreover, management members have low change-in-control compensation indicating they are not incentivized to pursue a buyout or sale of the firm. Finally, most management members are material owners of UBER equity relative to their annual compensation, indicating they are well-aligned with shareholders for long-term value creation.