VREX – No Traded CDS, Base Case iCDS 302bps, Negative Case iCDS 422bps, 2027 7.875% Bond YTW of 7.269%, iYTW of 5.959%, B2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

May 13, 2022

  • Credit markets are overstating VREX’s credit risk with a YTW of 7.269%, relative to an Intrinsic YTW of 5.959% and an Intrinsic CDS of 302bps. Meanwhile, Moody’s is also materially overstating the firm’s fundamental credit risk, with its highly speculative B2 credit rating seven notches lower than Valens’ IG4+ (Baa1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights mixed signals for VREX credit holders. Management’s compensation metrics should drive management to improve margins and grow the business, leading to ROA expansion. In addition, management members are not well-compensated in a change-in-control scenario, indicating they are unlikely to pursue a sale or accept a buyout of the firm, limiting event risk.

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