Consumer Discretionary
The combination of Ford’s cash flows and cash on hand should be sufficient to meet all obligations including debt maturities through 2028. Furthermore, the firm’s large M/Cap and moderate recovery rate should allow it to access credit markets to refinance, if necessary. Despite this strong credit profile, credit markets are grossly overstating Ford’s credit risk with a 5-year CDS of 377 bps and a YTW on its 2025 bonds near 5.5%, relative to an Intrinsic CDS and YTW of 71 bps and 3.5%, respectively. As a result, credit investors are being over-compensated for the risk they are accepting and Ford’s bonds could make for a good addition in a corporate bond portfolio.
Edition: 136
- 27 May, 2022