AMCX - Valens Credit Report - 2024 02 21
Credit markets are grossly overstating AMCX's credit risk with a YTW of 12.652% relative to an Intrinsic YTW of 8.879% and an Intrinsic CDS of 458bps. Furthermore, Moody's is materially overstating AMCX's fundamental credit risk with its B1 credit rating four notches below Valens' XO (Baa3) credit rating.Incentives Dictate BehaviorTM analysis highlights mostly positive signals for credit holders. AMCX's compensation metrics should drive management to focus on all three value drivers: margin expansion, asset efficiency, and top-line growth, which should lead to Uniform ROA expansion and increased cash flows available for servicing obligations. Additionally, 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, decreasing event risk for creditors.
AMC Networks is a holding company. Through its subsidiaries, the company is engaged in owning and operating entertainment businesses and assets. The company's operating segments are: National Networks, which includes activities of the company's programming businesses, which include programming networks such as AMC, WE tv, BBC AMERICA, IFC, and SundanceTV in the U.S., and AMC and IFC in Canada; and International and Other, which includes AMC Networks International, the company's international programming businesses consisting of a portfolio of channels; IFC Films, the company's independent film distribution business, and its subscription streaming services Acorn TV and UMC, Shudder and Sundance Now.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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