VSNT Credit: Laying Up at Par

We initiate coverage of Versant with a neutral fundamental view on the credit and 1L debt. Strong FCF and low leverage protect creditors despite ~30% EBITDA erosion from FY26E to FY29E, but capital allocation limits upside. At current levels, risk-reward looks balanced. We forecast net leverage of ~1.1x through FY29E and ~$1bn of annual FCF through FY27E, but adj. EBITDA declines from $1.96bn in FY26E to $1.37bn in FY29E while gross leverage rises from 1.50x to 1.89x. Distribution and advertising, over 80% of sales, fall 7% and 4% respectively in FY26E, and Platforms at ~13% of revenue cannot offset pay-TV erosion. Shareholder returns rise from 52% of FCF in FY26E to 83% by FY29E, leaving residual FCF of just $7mn. A 3.0-4.0x forward EV/EBITDA on FY27E EBITDA implies $5.1-6.9bn EV, or 1.8-2.4x secured debt coverage. The 7.25% secured 2031s look fairly valued; we would become more constructive on widening toward 275bp, while 175-185bp leaves little compensation.