WDC – Base Case CDS 290bps, Base Case iCDS 135bps, Negative Case iCDS 400bps, 2026 4.750% Bond YTW of 7.205%, iYTW of 5.399%, Baa3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

November 11, 2022

  • Credit markets are materially overstating credit risk, with a cash bond YTW of 7.205% and a CDS of 290bps relative to an Intrinsic YTW of 5.399% and an Intrinsic CDS of 135bps. 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. That said, management has low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, thereby reducing event risk for creditors.

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