Navistar's Strong Cash Should Drive Investment Grade Credit Rating And Tightening Spreads
- Moody's deep junk B3 rating of NAV grossly overstates credit risk by not recognizing fundamentals.
- NAV's sizable, growing cash flows and cash balance provide a strong cushion for debt service and other expenditures.
- NAV's CDS of 598bps should tighten to Valens Intrinsic CDS (iCDS) of 200bps.
- Flexibility in maintenance capital expenditures, research and development, and pension contributions create a better ability to avoid default.
- Recent changes in NAV's executive compensation plan more suitably align management with creditors.