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WDC – Closed CDS 203bps, Base Case iCDS 130bps, Negative Case iCDS 433bps, 2026 4.750% Bond YTW of 6.107%, iYTW of 5.101%, Baa3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

April 25, 2023

  • In the base scenario, cash bond markets are overstating WDC’s credit risk with a cash bond YTW of 6.107% relative to an Intrinsic YTW of 5.101%, while CDS markets are slightly overstating WDC’s credit risk with a CDS of 203bps and an Intrinsic CDS of 130bps. That said, based on a negative case, credit markets are materially understating WDC’s credit risk with a YTW of 6.107% and a CDS of 203bps relative to an Intrinsic YTW of 8.131% and an Intrinsic CDS of 433bps.

  • Meanwhile, Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. Creditors may be concerned about management’s potential to overspend on capex or take on excess leverage to finance growth as elevated interest expenses would not affect their total compensation.

  • Furthermore, Valens’ qualitative analysis of WDC’s Q2 2023 earnings call highlights that management may be concerned about having access to enough liquidity to manage the current downturn.

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