MIRA
INFORM REPORT
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Report Date : |
17.08.2011 |
IDENTIFICATION DETAILS
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Name : |
MOLYCORP MINERALS LLC |
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Registered Office : |
5619 Dtc Pkwy Greenwood Vlg, CO 80111-3013 |
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Country : |
United States |
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Date of Incorporation : |
Not Available |
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Legal Form : |
Private Subsidiary |
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Line of Business : |
Management Advice and Related Consulting Services |
RATING & COMMENTS
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MIRA’s Rating : |
Ba |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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Status : |
Satisfactory |
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Payment Behaviour : |
Usually Correct |
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Litigation : |
Clear |
NOTES :
Any query related to this report can be made
on e-mail: infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – March 31st, 2011
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Country Name |
Previous Rating (31.12.2010) |
Current Rating (31.03.2011) |
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United States |
A1 |
A1 |
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Risk Category |
ECGC
Classification |
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Insignificant |
A1 |
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Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
Company name and address
Molycorp Minerals LLC
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Business
Description
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Nonclassifiable Establishments |
Industry
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Industry |
Business Services |
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ANZSIC 2006: |
6962 - Management Advice and Related
Consulting Services |
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NACE 2002: |
7414 - Business and management consultancy
activities |
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NAICS 2002: |
541690 - Other Scientific and Technical
Consulting Services |
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UK SIC 2003: |
7414 - Business and management consultancy
activities |
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US SIC 1987: |
9999 - Nonclassifiable Establishments |
Key
Executives (Emails Available)
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News
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1 - Profit & Loss Item Exchange Rate: USD 1 = USD 1
2 - Balance Sheet Item Exchange Rate: USD 1 = USD 1
Corporate Overview
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Molycorp
Minerals LLC |
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Corporate Structure News
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Molycorp
Minerals LLC |
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Company Name |
Company Type |
Location |
Country |
Industry |
Sales |
Employees |
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Parent |
Greenwood Village, CO |
United States |
Metal Mining |
35.2 |
165 |
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Subsidiary |
Greenwood Vlg, CO |
United States |
Business Services |
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Subsidiary |
Tolleson, AZ |
United States |
Metal Mining |
22.6 |
50 |
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Recently acquired (previously owned by Santoku America Inc).See corporate
structure news on Molycorp, Inc. for details |
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Executives Report
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Elissa Expands
Land Position at Thor Rare Earth Project, Prepares for Additional Geophysics,
Nevada
Market Wire: 11 July 2011
[What follows is the full text of the news story.]
VANCOUVER, BRITISH
COLUMBIA -- (MARKET WIRE) -- 07/11/11 -- Elissa Resources ("Elissa"
or the "Company") (TSX VENTURE: ELI) reports that it has increased
its land holdings in the vicinity of its Thor heavy and light rare earth (REE)
project. The Thor project is located in the eastern Mojave Desert region of
Nevada, 47 miles (76 km) south of Las Vegas and 16 miles (28 km) east of
Molycorp Minerals' Mountain Pass REE mine and processing facility in the
neighbouring state of California. The new ground in the Thor project area was
selected for having potential to host REE mineralization similar to that
already defined by Elissa on the current prospect block. The new lands increase
Elissa's 100%-owned holdings in the Thor Project area by approximately 12% to a
total of 1,805 hectares.
The Thor REE
Project is represented at surface by both heavy and light rare earth elements.
The ratio of heavy to light rare earths in assays of surface samples from the
Thor Project is significant, averaging approximately 1 part heavy REE per 10
parts light REE. Included are significant amounts of the four rare earth
elements deemed by the United States Department of Energy (December, 2010
report) to be in a critical state of supply shortage (neodymium, terbium,
dysprosium and yttrium).
Substantial REE
mineralization in the Thor Project has been discovered in at least nine widely
separate prospect localities in three distinct discovery zones. The largest of
these is the Lopez Trend, a 1.5 mile (2.6 km) long REE-bearing zone that is coincident
with a prominent magnetic anomaly identified in Elissa's airborne geophysical
survey carried out late last year (2010). Elissa intends to follow up results
of the airborne geophysical survey with a more detailed, extensive ground
magnetic survey set to begin later this month (July). Results of this
geophysical survey will be incorporated into selecting and prioritizing targets
for the Company's core drilling program set to begin later in the year. The
Company is also reviewing and aggressively pursuing REE opportunities in other
parts of Nevada and neighbouring states.
Additionally the
Company wishes to clarify information attributed to a news release issued on
June 29, 2011 by a similarly named European communication services company
which was incorrectly picked up by at least one major news reporting agency as
having been issued by Elissa Resources Ltd.; Elissa Resources therefore
confirms that it currently has 28,845,517 shares outstanding.
The technical
information outlined in this news release, has been reviewed and approved by
Curt Hogge, MSc, a consultant to Elissa Resources, a member of the AIPG, and a
Qualified Person as defined in the current National Instrument 43-101.
ON BEHALF OF THE
BOARD OF DIRECTORS of ELISSA RESOURCES Ltd.
Paul McKenzie,
President and CEO
About Elissa
Resources Ltd.
Elissa Resources
is advancing its 100% owned Thor heavy and light rare earth elements project in
Nevada, 16 miles (28 km) east of Molycorp Minerals' Mountain Pass deposit,
California. Additionally Elissa has an option to earn a 100% interest on both
the Sage Creek and St. Elmo gold projects also in Nevada. Elissa is also
reviewing and aggressively pursuing REE opportunities in other parts of Nevada
and neighbouring states.
Statements in this
press release other than purely historical information, including statements
relating to the Company's future plans, objectives or expected results,
constitute forward-looking statements. Forward-looking statements are based on
numerous assumptions and are subject to the risks and uncertainties inherent in
the Company's business, including risks inherent in mineral exploration and
development, and uncertainties in connection with anticipated commodity prices
for minerals, growth of worldwide market demand, exploration capital
requirements, length of asset life and availability of qualified personnel,
among others. As a result, actual results may vary materially from those
described in the forward-looking statements.
Neither The TSX
Venture Exchange nor its Regulation Services Provider (as that term is defined
in the policies of the TSX Venture Exchange) accepts responsibility for the
adequacy or accuracy of this release.
Contacts:
Elissa Resources
Ltd.Paul McKenzie
President / CEO
604 669 8368 (ext
107)
contact@elissaresources.comwww.elissaresources.com
US Rare Earth
Company Resumes Full-Capacity Production
SinoCast: 20 June 2011
[What follows is the full text of the news story.]
BEIJING, Jun 20,
2011 (SinoCast Daily Business Beat via COMTEX) -- The US largest rare earth
company Molycorp Minerals is resuming full-capacity production of a rare earth
deposit in Mountain Pass, California, which is expected to reach 20,000 t/year
production capacity next year, said an anonymous insider.
The insider,
former official of Ministry of Industry and Information Technology, just paid a
visit to Molycorp Minerals and Mountain Pass rare earth deposit early in June.
Molycorp Minerals' annual production capacity can rally to 40,000 tons by 2015.
All of the rare earths will be supplied for domestic use in the US.
Australia and
Canada also plan to resume the development of domestic rare earths as China
pinches mining and export of domestic rare earths on environment protection
concern. China supplied over 90% of global rare earth exports in the past 15
years while the domestic rare earth resource as a proportion of the global
total dropped to 31% from 43%.
The resumption of
rare earth production in foreign countries may impact China's share in global
light rare earth market, said analysts. But foreign countries maintain
dependent on Chinese heavy rare earth as there is few heavy rare earth resource
abroad.
International
heavy rare earth prices have nearly doubled following China's control on
domestic rare earth resource.
Publication No.
AU2011202112 Published on May 26, Assigned to Molycorp Minerals for Arsenic
Removal Process
Australian Government: 16 June 2011
[What follows is the full text of the news story.]
PHILLIP, ACT, June
16 -- Richard D. Witham, Edward B. McNew and John L. Burba have developed a
process for removing arsenic from aqueous streams.
The patent has
been assigned to Molycorp Minerals LLC.
The invention
carries International Patent Publication No. AU2011202112 on May 26.
The original
patent was filed under Application No. AU20110202112 on May 9, 2011.
The original
document can be viewed at:
http://worldwide.espacenet.com/publicationDetails/biblio?DB=EPODOC&adjacent=true&locale=en_EP&FT=D&date=20110526&CC=AU&NR=2011202112A1&KC=A1
For any query with
respect to this article or any other content requirement, please contact Editor
at htsyndication@hindustantimes.com
Australia:
Molycorp Minerals Received Patent for 'Process for removing arsenic from
aqueous streams'
Australian Government: 15 June 2011
[What follows is the full text of the news story.]
Australia, June 15
-- Molycorp Minerals LLC, Colorado, U.S., has filed an application (2009251182)
on Dec. 23, 2009, for 'Process for removing arsenic from aqueous streams.'
The patent is
effective from Jan. 28, 2004, till Jan. 28, 2024.
Inventor(s):
Edward B. McNew, Richard D. Witham and John L. Burba
Application
Status: Sealed
Acceptance Date:
Jan. 23
Paid to Date: Jan.
28, 2012
The original
document can be viewed at:
http://pericles.ipaustralia.gov.au/ols/auspat/applicationDetails.do?applicationNo=2009251182
For any query with
respect to this article or any other content requirement, please contact Editor
at htsyndication@hindustantimes.com
Australia Patent:
Molycorp Minerals Files Application for 'Target material removal using rare
earth metals'
Australian Government: 13 June 2011
[What follows is the full text of the news story.]
Australia, June 13
-- Molycorp Minerals LLC, Colorado, U.S., has filed an application (2009314130)
on Nov. 11, 2009, for 'Target material removal using rare earth metals.'
Inventor(s): John
Burba, Carl Hassler, Charles Whitehead, Joseph Lupo, Brock Conrad O'Kelley,
Robert Cable, Joseph Pascoe and Brandt Wright
Application
Status: Filed
The original
document can be viewed at:
http://pericles.ipaustralia.gov.au/ols/auspat/applicationDetails.do?applicationNo=2009314130
For any query with
respect to this article or any other content requirement, please contact Editor
at htsyndication@hindustantimes.com
Australia Patent:
Molycorp Minerals Files Application for 'Process using rare earths to remove
oxyanions from aqueous streams'
Australian Government: 26 May 2011
[What follows is the full text of the news story.]
Australia, May 26
-- Molycorp Minerals LLC, Colorado, U.S., has filed an application (2011202116)
on May 9 for 'Process using rare earths to remove oxyanions from aqueous
streams.'
Application
Status: Filed
The original
document can be viewed at:
http://pericles.ipaustralia.gov.au/ols/auspat/applicationDetails.do?applicationNo=2011202116
For any query with
respect to this article or any other content requirement, please contact Editor
at htsyndication@hindustantimes.com
Australia Patent:
Molycorp Minerals Files Application for 'Process for removing arsenic from
aqueous streams'
Australian Government: 26 May 2011
[What follows is the full text of the news story.]
Australia, May 26
-- Molycorp Minerals LLC, Colorado, U.S., has filed an application (2011202112)
on May 9 for 'Process for removing arsenic from aqueous streams.'
Inventor(s):
Richard D. Witham, Edward B. McNew and John L. Burba
Application
Status: Filed
The original
document can be viewed at:
http://pericles.ipaustralia.gov.au/ols/auspat/applicationDetails.do?applicationNo=2011202112
For any query with
respect to this article or any other content requirement, please contact Editor
at htsyndication@hindustantimes.com
Molycorp Acquires
Rare Earth Metal and Alloy Manufacturer Santoku America, Inc.
Business Wire: 18 April 2011
[What follows is the full text of the news story.]
Acquisition Allows
Molycorp To Immediately Begin Manufacturing and Selling Alloys for Powerful
Rare Earth Magnets
GREENWOOD VILLAGE,
Colo. & KOBE, Japan--(BUSINESS WIRE)-- Molycorp, Inc. (NYSE: MCP) today
announced that its wholly owned subsidiary Molycorp Minerals, LLC (Molycorp)
has acquired Arizona-based Santoku America, Inc. (SAI), one of the leading
producers of high-purity rare earth alloys and metals outside of China, in an
all-cash deal for $17.5 million. The transaction closed on Friday, April 15, at
a ceremony attended by senior management representatives from Molycorp, SAI,
and Japan-based Santoku Corporation, SAI�s former parent company.
The acquisition
provides Molycorp with the capability to immediately begin manufacturing and
selling rare earth alloys for the production of neodymium iron boron (NdFeB)
magnets (used in electric and hybrid cars, advanced wind energy turbines, and
many high tech electronics and applications) and samarium cobalt (SmCo) magnets
(used in defense and other applications), as well as a variety of other
specialty alloys and products. SAI will immediately begin sourcing rare earth
feed stocks for production of its products from Molycorp�s Mountain Pass,
California rare earth mine and processing facility, making it the first rare
earth metal and alloy producer in North America that is not dependent on rare
earth materials sourced from China. Based in Tolleson, Arizona, the facility
has been producing specialty alloys, including rare earth alloys, for more than
30 years. The employees there are highly experienced and skilled in the
production of rare earth and specialty alloys.
The company will
change its name from SAI to Molycorp Metals and Alloys, Inc., to better reflect
its new U.S. based ownership and its access to one of the world�s richest
rare earth ore deposits at Molycorp�s Mountain Pass rare earth mine and
processing facility. Additionally, pursuant to the terms of the transaction,
Santoku Corporation will provide Molycorp Metals and Alloys, Inc. with
technical assistance with respect to the production of rare earth alloys on an
ongoing basis and also will act as the exclusive authorized distributor of
strip cast NdFeB alloys produced by Molycorp Metals and Alloys, Inc.
�We are very
pleased with this acquisition," said Mark A. Smith, President and Chief
Executive Officer of Molycorp, Inc. "It further strengthens and expands
the excellent relationship Molycorp and Santoku Corporation have enjoyed for
many years. It also accelerates our plans to deploy a fully integrated
�mine-to-magnets� manufacturing supply chain in the U.S. In addition to
working with Santoku Corporation as our distributor of strip cast NdFeB alloys
manufactured at the Arizona plant, we also look forward to continuing our
supply relationship in support of Santoku�s ongoing alloy manufacturing
operations in Japan.�
"The highly
experienced SAI team will be a great addition to our rapidly growing Molycorp
family, and I am especially pleased that we will be gaining the talents and
experience of SAI President Randall Ice in this acquisition," added Smith.
�We at Santoku
Corporation are pleased that Molycorp has acquired our U.S. based manufacturing
operations and that by selling those operations, we have been able to help
Molycorp in creating a fully domestic �mine-to-magnets� manufacturing chain
in the U.S.,� said Yusuke Inoue, Chairman of Santoku Corporation.
Media Availability
Via Conference Call
Molycorp CEO Mark
Smith will speak to members of the news media at a media availability event at
the Molycorp Metals and Alloys facility in Tolleson, Arizona (8220 West
Harrison Street) at 12:45 p.m. Pacific to discuss this acquisition and its
implications. Accredited members of the news media are welcome to attend in
person or to participate via conference call-in. Conference call-in numbers are
provided below:
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From the US: +1 (323) 417-4600, access code: 689-019-182 |
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From the UK: +44 (0) 121 368 0265, access code: 689-019-182 |
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From Canada: +1 (416) 900-1162, access code: 689-019-182 |
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From Australia: +61 (0) 2 8014 4932, access code: 689-019-182 |
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From Germany: +49 (0) 898 7806 6471, 689-019-182 |
About Molycorp
Colorado-based
Molycorp, Inc. is the only REO producer in the Western Hemisphere and currently
produces more than 3,000 metric tons of commercial rare earth materials per
year. In addition to its rare earth mine and processing facility at Mountain
Pass, California, Molycorp also owns a controlling interest in the
Estonia-based Molycorp Silmet AS, which has a production capacity of 3,000
metric tons of rare earth products and 700 metric tons of rare metal products
annually and is one of the largest rare metal and rare earth metal producers in
Europe. Following the execution of Molycorp's "mine-to-magnets"
strategy and the expected 2012 completion of Phase 1 of its modernization and
expansion efforts at its Mountain Pass, California processing facility,
Molycorp expects to produce at a rate of approximately 19,050 metric tons of
REO equivalent per year from Mountain Pass. The Company expects to achieve an
annual production capacity at Mountain Pass by the end of 2013 of approximately
40,000 metric tons of REO equivalent per year after the completion of Phase 2.
Molycorp intends to provide to the market a range of rare earth products,
including high-purity oxides, metals, alloys, and permanent magnets. The
company currently sells products to customers in Europe, North and South
America, Asia, Russia, and other previous Soviet Union countries.
This press release
contains forward-looking statements that represent the Company�s beliefs,
projections and predictions about future events or its future performance. You
can identify forward-looking statements by terminology such as "may,"
"will," "would," "could," "should,"
"expect," "intend," "plan,"
"anticipate," "believe," "estimate,"
"predict," "potential," "continue" or the
negative of these terms or other similar expressions or phrases. These
forward-looking statements are necessarily subjective and involve known and
unknown risks, uncertainties and other important factors that could cause the
Company�s actual results, performance or achievements or industry results to
differ materially from any future results, performance or achievement described
in or implied by such statements. Factors that may cause actual results to
differ materially from expected results described in forward-looking statements
include, but are not limited to: the Company's ability to effectively
assimilate Santoku America, Inc. into its overall operations; the Company�s
ability to secure sufficient capital to implement its business plans; the
Company�s ability to complete its Phase 1 modernization and expansion efforts
and Phase 2 expansion efforts and reach planned production rates for REOs and
other planned downstream products; uncertainties associated with the
Company�s reserve estimates and non-reserve deposit information;
uncertainties regarding global supply and demand for rare earth materials; the
Company�s ability to maintain appropriate relations with unions and
employees; the Company�s ability to successfully implement its
"mine-to-magnets" strategy; environmental laws, regulations and
permits affecting the Company�s business, directly and indirectly, including,
among others, those relating to mine reclamation and restoration, climate
change, emissions to the air and water and human exposure to hazardous substances
used, released or disposed of by the Company; uncertainties associated with
unanticipated geological conditions related to mining; and other risks
discussed in the Company�s filings with the U.S. Securities and Exchange
Commission, including the Company�s Quarterly Report on Form 10-Q for the
period ended December 31, 2010, which filings are available from the SEC.
Any
forward-looking statement you read in this press release reflects the
Company�s current views with respect to future events and is subject to these
and other risks, uncertainties and assumptions relating to the Company�s
operations, operating results, growth strategy and liquidity. You should not
place undue reliance on these forward-looking statements because such
statements speak only as to the date when made. The Company assumes no
obligation to publicly update or revise these forward-looking statements for
any reason, or to update the reasons actual results could differ materially
from those anticipated in these forward-looking statements, even if new
information becomes available in the future, except as otherwise required by
applicable law.
Molycorp, Inc.
Jim Sims, +1 303-843-8067
Director of Public Affairs
Jim.Sims@Molycorp.com
or
Investor Relations:
ICR, LLC
Gary T. Dvorchak, CFA, +1 310-954-1123
Senior Vice President
Gary.Dvorchak@icrinc.com
Standard & Poor’s
|
United
States of America Long-Term Rating Lowered To 'AA+' Due To Political Risks,
Rising Debt Burden; Outlook Negative |
|
Publication
date: 05-Aug-2011 20:13:14 EST |
·
We have lowered our long-term
sovereign credit rating on the United States of America to 'AA+' from 'AAA' and
affirmed the 'A-1+' short-term rating.
·
We have also removed both the short- and long-term ratings from
CreditWatch negative.
·
The downgrade reflects our
opinion that the fiscal consolidation plan that Congress and the Administration
recently agreed to falls short of what, in our view, would be necessary to
stabilize the government's medium-term debt dynamics.
·
More broadly, the downgrade
reflects our view that the effectiveness, stability, and predictability of
American policymaking and political institutions have weakened at a time of
ongoing fiscal and economic challenges to a degree more than we envisioned when
we assigned a negative outlook to the rating on April 18, 2011.
·
Since then, we have changed our
view of the difficulties in bridging the gulf between the political parties
over fiscal policy, which makes us pessimistic about the capacity of Congress
and the Administration to be able to leverage their agreement this week into a
broader fiscal consolidation plan that stabilizes the government's debt
dynamics any time soon.
·
The outlook on the long-term
rating is negative. We could lower the long-term rating to 'AA' within the next
two years if we see that less reduction in spending than agreed to, higher
interest rates, or new fiscal pressures during the period result in a higher
general government debt trajectory than we currently assume in our base case.
TORONTO (Standard &
Poor's) Aug. 5, 2011--Standard & Poor's Ratings Services said today that it
lowered its long-term sovereign credit rating on the United States of America
to 'AA+' from 'AAA'. Standard & Poor's also said that the outlook on the
long-term rating is negative. At the same time, Standard & Poor's affirmed
its 'A-1+' short-term rating on the U.S. In addition, Standard & Poor's
removed both ratings from CreditWatch, where they were placed on July 14, 2011,
with negative implications.
The transfer and
convertibility (T&C) assessment of the U.S.--our assessment of the
likelihood of official interference in the ability of U.S.-based public- and
private-sector issuers to secure foreign exchange for
debt service--remains
'AAA'.
We lowered our long-term
rating on the U.S. because we believe that the prolonged controversy over
raising the statutory debt ceiling and the related fiscal policy debate
indicate that further near-term progress containing the growth in public
spending, especially on entitlements, or on reaching an agreement on raising
revenues is less likely than we previously assumed and will remain a
contentious and fitful process. We also believe that the fiscal consolidation
plan that Congress and the Administration agreed to this week falls short of
the amount that we believe is necessary to stabilize the general government
debt burden by the middle of the decade.
Our lowering of the
rating was prompted by our view on the rising public debt burden and our
perception of greater policymaking uncertainty, consistent with our criteria
(see "Sovereign Government Rating Methodology and
Assumptions ," June 30, 2011, especially Paragraphs 36-41).
Nevertheless, we view the U.S. federal government's other economic, external,
and monetary credit attributes, which form the basis for the sovereign rating,
as broadly unchanged.
We have taken the ratings
off CreditWatch because the Aug. 2 passage of the Budget Control Act Amendment
of 2011 has removed any perceived immediate threat of payment default posed by
delays to raising the government's debt ceiling. In addition, we believe that
the act provides sufficient clarity to allow us to evaluate the likely course
of U.S. fiscal policy for the next few years.
The political
brinksmanship of recent months highlights what we see as America's governance
and policymaking becoming less stable, less effective, and less predictable
than what we previously believed. The statutory debt ceiling and the threat of
default have become political bargaining chips in the debate over fiscal
policy. Despite this year's wide-ranging debate, in our view, the differences
between political parties have proven to be extraordinarily difficult to
bridge, and, as we see it, the resulting agreement fell well short of the
comprehensive fiscal consolidation program that some proponents had envisaged
until quite recently. Republicans and Democrats have only been able to agree to
relatively modest savings on discretionary spending while delegating to the
Select Committee decisions on more comprehensive measures. It appears that for
now, new revenues have dropped down on the menu of policy options. In addition,
the plan envisions only minor policy changes on Medicare and little change in
other entitlements,
the containment of which
we and most other independent observers regard as key to long-term fiscal
sustainability.
Our opinion is that
elected officials remain wary of tackling the structural issues required to
effectively address the rising U.S. public debt burden in a manner consistent
with a 'AAA' rating and with 'AAA' rated sovereign peers (see Sovereign Government Rating Methodology and
Assumptions," June 30, 2011, especially Paragraphs 36-41). In
our view, the difficulty in framing a consensus on fiscal policy weakens the
government's ability to manage public finances and diverts attention from the
debate over how to achieve more balanced and dynamic economic growth in an era
of fiscal stringency and private-sector deleveraging (ibid). A new political
consensus might (or might not) emerge after the 2012 elections, but we believe
that by then, the government debt burden will likely be higher, the needed
medium-term fiscal adjustment potentially greater, and the inflection point on
the U.S. population's demographics and other age-related spending drivers closer
at hand (see "Global Aging 2011: In The U.S., Going Gray Will Likely
Cost Even More Green, Now," June 21, 2011).
Standard & Poor's
takes no position on the mix of spending and revenue measures that Congress and
the Administration might conclude is appropriate for putting the U.S.'s
finances on a sustainable footing.
The act calls for as much
as $2.4 trillion of reductions in expenditure growth over the 10 years through
2021. These cuts will be implemented in two steps: the $917 billion agreed to
initially, followed by an additional $1.5 trillion that the newly formed
Congressional Joint Select Committee on Deficit Reduction is supposed to
recommend by November 2011. The act contains no measures to raise taxes or
otherwise enhance revenues, though the committee could recommend them.
The act further provides
that if Congress does not enact the committee's recommendations, cuts of $1.2 trillion
will be implemented over the same time period. The reductions would mainly
affect outlays for civilian discretionary spending, defense, and Medicare. We
understand that this fall-back mechanism is designed to encourage Congress to
embrace a more balanced mix of expenditure savings, as the committee might
recommend.
We note that in a letter
to Congress on Aug. 1, 2011, the Congressional Budget Office (CBO) estimated
total budgetary savings under the act to be at least $2.1 trillion over the
next 10 years relative to its baseline assumptions. In updating our own fiscal
projections, with certain modifications outlined below, we have relied on the
CBO's latest "Alternate Fiscal Scenario" of June 2011, updated to
include the CBO assumptions contained in its Aug. 1 letter to Congress. In
general, the CBO's "Alternate Fiscal Scenario" assumes a continuation
of recent Congressional action overriding existing law.
We view the act's
measures as a step toward fiscal consolidation. However, this is within the framework
of a legislative mechanism that leaves open the details of what is finally
agreed to until the end of 2011, and Congress and the Administration could
modify any agreement in the future. Even assuming that at least $2.1 trillion
of the spending reductions the act envisages are implemented, we maintain our
view that the U.S. net general government debt burden (all levels of government
combined, excluding liquid financial assets) will likely continue to grow.
Under our revised base case fiscal scenario--which we consider to be consistent
with a 'AA+' long-term rating and a negative outlook--we now project that net
general government debt would rise from an estimated 74% of GDP by the end of
2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of sovereign
indebtedness is high in relation to those of peer credits and, as noted, would
continue to rise under the act's revised policy settings.
Compared with previous
projections, our revised base case scenario now assumes that the 2001 and 2003
tax cuts, due to expire by the end of 2012, remain in place. We have changed
our assumption on this because the majority of Republicans in Congress continue
to resist any measure that would raise revenues, a position we believe Congress
reinforced by passing the act. Key macroeconomic assumptions in the base case
scenario include trend real GDP growth of 3% and consumer price inflation near
2% annually over the decade.
Our revised upside
scenario--which, other things being equal, we view as consistent with the
outlook on the 'AA+' long-term rating being revised to stable--retains these
same macroeconomic assumptions. In addition, it incorporates $950 billion of
new revenues on the assumption that the 2001 and 2003 tax cuts for high earners
lapse from 2013 onwards, as the Administration is advocating. In this scenario,
we project that the net general government debt would rise from an estimated
74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.
Our revised downside
scenario--which, other things being equal, we view as being consistent with a
possible further downgrade to a 'AA' long-term rating--features less-favorable
macroeconomic assumptions, as outlined below and also assumes that the second
round of spending cuts (at least $1.2 trillion) that the act calls for does not
occur. This scenario also assumes somewhat higher nominal interest rates for
U.S. Treasuries. We still believe that the role of the U.S. dollar as the key
reserve currency confers a government funding advantage, one that could change
only slowly over time, and that Fed policy might lean toward continued loose
monetary policy at a time of fiscal tightening. Nonetheless, it is possible
that interest rates could rise if investors re-price relative risks. As a
result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in
10-year bond yields relative to the base and upside cases from 2013 onwards. In
this scenario, we project the net public debt burden would rise from 74% of GDP
in 2011 to 90% in 2015 and to 101% by 2021.
Our revised scenarios
also take into account the significant negative revisions to historical GDP
data that the Bureau of Economic Analysis announced on July 29. From our
perspective, the effect of these revisions underscores two related points when
evaluating the likely debt trajectory of the U.S. government. First, the
revisions show that the recent recession was deeper than previously assumed, so
the GDP this year is lower than previously thought in both nominal and real
terms. Consequently, the debt burden is slightly higher. Second, the revised
data highlight the sub-par path of the current economic recovery when compared
with rebounds following previous post-war recessions. We believe the sluggish
pace of the current economic recovery could be consistent with the experiences
of countries that have had financial crises in which the slow process of debt
deleveraging in the private sector leads to a persistent drag on demand. As a
result, our downside case scenario assumes relatively modest real trend GDP
growth of 2.5% and inflation of near 1.5% annually going forward.
When comparing the U.S.
to sovereigns with 'AAA' long-term ratings that we view as relevant
peers--Canada, France, Germany, and the U.K.--we also observe, based on our
base case scenarios for each, that the trajectory of the U.S.'s net public debt
is diverging from the others. Including the U.S., we estimate that these five
sovereigns will have net general government debt to GDP ratios this year
ranging from 34% (Canada) to 80% (the U.K.), with the U.S. debt burden at 74%.
By 2015, we project that their net public debt to GDP ratios will range between
30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at
79%. However, in contrast with the U.S., we project that the net public debt
burdens of these other sovereigns will begin to decline, either before or by
2015.
Standard & Poor's
transfer T&C assessment of the U.S. remains 'AAA'. Our T&C assessment
reflects our view of the likelihood of the sovereign restricting other public
and private issuers' access to foreign exchange needed to meet debt service.
Although in our view the credit standing of the U.S. government has
deteriorated modestly, we see little indication that official interference of
this kind is entering onto the policy agenda of either Congress or the
Administration. Consequently, we continue to view this risk as being highly
remote.
The outlook on the
long-term rating is negative. As our downside alternate fiscal scenario
illustrates, a higher public debt trajectory than we currently assume could
lead us to lower the long-term rating again. On the other hand, as our upside
scenario highlights, if the recommendations of the Congressional Joint Select
Committee on Deficit Reduction--independently or coupled with other
initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high
earners--lead to fiscal consolidation measures beyond the minimum mandated, and
we believe they are likely to slow the deterioration of the government's debt
dynamics, the long-term rating could stabilize at 'AA+'.
On Monday, we
will issue separate releases concerning affected ratings in the funds,
government-related entities, financial institutions, insurance, public finance,
and structured finance sectors.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.45.24 |
|
|
1 |
Rs.73.88 |
|
Euro |
1 |
Rs.65.06 |
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
-- |
NB |
New Business |
-- |
This score serves as a reference to assess SC’s credit risk and
to set the amount of credit to be extended. It is calculated from a composite
of weighted scores obtained from each of the major sections of this report. The
assessed factors and their relative weights (as indicated through %) are as
follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.