WDC – Base Case CDS 249bps, Base Case iCDS 114bps, Negative Case iCDS 361bps, 2026 4.750% Bond YTW of 6.236%, iYTW of 5.119%, Baa3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
January 17, 2023
- Credit markets are overstating credit risk, with a cash bond YTW of 6.236% and a CDS of 249bps relative to an Intrinsic YTW of 5.119% and an Intrinsic CDS of 114bps. Furthermore, Moody’s is overstating WDC’s fundamental credit risk with its Baa3 credit rating two notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. Management’s short-term compensation is based on non-GAAP operating income, flash exabytes and HDD exabytes shipped, and each NEO’s individual performance. Meanwhile, long-term incentives are awarded in the form of performance-based units (PSU) and time-vested restricted stock units (RSU) with a relative market performance adjustment. PSUs are measured and granted based on the company’s three-year stock performance relative to the S&P 500.
