UBER – CDS 258bps, Base Case iCDS 43bps, Negative Case iCDS 51bps, 2025 7.500% Bond YTW of 2.545%, iYTW of 1.665%, B3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
November 18, 2021
- CDS markets are materially overstating credit risk with a CDS of 258bps relative to an Intrinsic CDS of 43bps, while cash bond markets are overstating credit risk with a YTW of 2.545% relative to an Intrinsic YTW of 1.665%. In addition, Moody’s is grossly overstating UBER’s fundamental credit risk with its highly speculative B3 credit rating eight notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. UBER’s compensation framework should drive them to focus on margin expansion and revenue growth, which may lead to Uniform ROA expansion. Moreover, management members have low change-in-control compensation indicating they are not incentivized to pursue a buyout. Finally, CEO Khosrowshahi is a material owner of UBER stock relative to his compensation, indicating he may be able to push other NEOs to be well-aligned with shareholders for long-term value creation.