XYZ – Base Case iCDS 70bps, Negative Case iCDS 98bps, 2031 3.500% Bond YTW of 5.618%, iYTW of 4.685%, Ba2 Rating from Moody’s, IG3+ (equivalent to A1) Rating from Valens, Low Refinancing Need
March 24, 2025
- Credit markets are slightly overstating credit risk with a YTW of 5.618% relative to an Intrinsic YTW of 4.685% and an Intrinsic CDS of 70bps. Furthermore, Moody’s is materially overstating XYZ’s fundamental credit risk with its speculative Ba2 credit rating seven notches below Valens’ IG3+ (A1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Most management members are material owners of XYZ equity relative to their annual compensation indicating they may be aligned with shareholders to pursue long-term value creation for the company. Furthermore, most members of management have low change-in-control compensation relative to their annual compensation. This indicates they may not be incentivized to pursue or accept a takeover or sale of the company, decreasing event risk for creditors.
