VGR Valens Credit Analysis – No Traded CDS, Base Case iCDS 355bps, Negative Case iCDS 428bps, 2025 6.125% Bond YTW of 6.503%, iYTW of 3.873%, B2 Rating from Moody’s, XO (equivalent to Baa3) Rating from Valens, High Refinancing Need

• Credit markets are grossly overstating credit risk with a cash bond YTW of 6.503% relative to an Intrinsic YTW of 3.873% and an Intrinsic CDS of 355bps. Meanwhile, Moody’s is materially overstating VGR’s fundamental credit risk with its highly speculative B2 credit rating five notches below Valens’ XO (Baa3) credit rating
• Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. VGR’s compensation framework should drive management to focus largely on margin expansion and top-line growth, which should lead to Uniform ROA improvement. In addition, management members hold material amounts of VGR equity relative to their annual compensation, indicating that they are likely well-aligned with shareholders for long-term value creation