MIRA INFORM REPORT
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Report Date : |
20.10.2012 |
IDENTIFICATION DETAILS
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Name : |
GUESS, INC. |
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Registered Office : |
144 S. Alameda Street, Los Angeles, CA 90021 |
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Country : |
United States |
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Financials (as on) : |
28.07.2012 (Condensed) |
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Date of Incorporation : |
03.08.1993 |
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Legal Form : |
Public Company |
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Line of Business : |
design, marketing, distribution, and licensing of lifestyle
collections of apparel and accessories for men, women, and children that
reflect the American lifestyle and European fashion sensibilities |
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No. of Employees : |
14,300 employees |
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 : |
Good |
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Payment Behaviour : |
No Complaints |
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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 – June 30th, 2012
|
Country Name |
Previous Rating (31.03.2012) |
Current Rating (30.06.2012) |
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United
States |
A1 |
A1 |
|
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 |
United States - ECONOMIC OVERVIEW
The US has the largest and most technologically powerful economy in the
world, with a per capita GDP of $48,100. In this market-oriented economy,
private individuals and business firms make most of the decisions, and the
federal and state governments buy needed goods and services predominantly in
the private marketplace. US business firms enjoy greater flexibility than their
counterparts in Western Europe and Japan in decisions to expand capital plant,
to lay off surplus workers, and to develop new products. At the same time, they
face higher barriers to enter their rivals' home markets than foreign firms
face entering US markets. US firms are at or near the forefront in
technological advances, especially in computers and in medical, aerospace, and
military equipment; their advantage has narrowed since the end of World War II.
The onrush of technology largely explains the gradual development of a
"two-tier labor market" in which those at the bottom lack the
education and the professional/technical skills of those at the top and, more
and more, fail to get comparable pay raises, health insurance coverage, and
other benefits. Since 1975, practically all the gains in household income have
gone to the top 20% of households. Since 1996, dividends and capital gains have
grown faster than wages or any other category of after-tax income. Imported oil
accounts for nearly 55% of US consumption. Oil prices doubled between 2001 and
2006, the year home prices peaked; higher gasoline prices ate into consumers'
budgets and many individuals fell behind in their mortgage payments. Oil prices
increased another 50% between 2006 and 2008. In 2008, soaring oil prices
threatened inflation and caused a deterioration in the US merchandise trade
deficit, which peaked at $840 billion. In 2009, with the global recession
deepening, oil prices dropped 40% and the US trade deficit shrank, as US
domestic demand declined, but in 2011 the trade deficit ramped back up to $803
billion, as oil prices climbed once more. The global economic downturn, the
sub-prime mortgage crisis, investment bank failures, falling home prices, and
tight credit pushed the United States into a recession by mid-2008. GDP
contracted until the third quarter of 2009, making this the deepest and longest
downturn since the Great Depression. To help stabilize financial markets, in
October 2008 the US Congress established a $700 billion Troubled Asset Relief
Program (TARP). The government used some of these funds to purchase equity in
US banks and industrial corporations, much of which had been returned to the
government by early 2011. In January 2009 the US Congress passed and President
Barack OBAMA signed a bill providing an additional $787 billion fiscal stimulus
to be used over 10 years - two-thirds on additional spending and one-third on
tax cuts - to create jobs and to help the economy recover. In 2010 and 2011,
the federal budget deficit reached nearly 9% of GDP; total government revenues
from taxes and other sources are lower, as a percentage of GDP, than that of
most other developed countries. The wars in Iraq and Afghanistan required major
shifts in national resources from civilian to military purposes and contributed
to the growth of the US budget deficit and public debt - through 2011, the
direct costs of the wars totaled nearly $900 billion, according to US
government figures. In March 2010, President OBAMA signed into law the Patient
Protection and Affordable Care Act, a health insurance reform bill that will
extend coverage to an additional 32 million American citizens by 2016, through
private health insurance for the general population and Medicaid for the
impoverished. Total spending on health care - public plus private - rose from
9.0% of GDP in 1980 to 17.9% in 2010. In July 2010, the president signed the
DODD-FRANK Wall Street Reform and Consumer Protection Act, a law designed to
promote financial stability by protecting consumers from financial abuses,
ending taxpayer bailouts of financial firms, dealing with troubled banks that
are "too big to fail," and improving accountability and transparency
in the financial system - in particular, by requiring certain financial
derivatives to be traded in markets that are subject to government regulation
and oversight. Long-term problems include inadequate investment in
deteriorating infrastructure, rapidly rising medical and pension costs of an
aging population, sizable current account and budget deficits - including
significant budget shortages for state governments - energy shortages, and
stagnation of wages for lower-income families.
|
Source : CIA |
Company name: GUESS?, INC.
Headquarters: 144 S. Alameda Street, Los Angeles, CA
90021 - USA
Telephone: 213-765-3100
Fax: 213-744-7838
Website: www.guess.com
Corporate ID#: 2346089
State: Delaware
Judicial form: Public Company (NYSE = GES)
Date founded: August 3rd, 1993
Stock: As of August 30,
2012 the registrant had 85,150,789
shares of common stock
Value: USD
0.01= par value
Name of manager: Paul
MARCIANO III
Business:
Guess?, Inc. engages in the design, marketing, distribution, and
licensing of lifestyle collections of apparel and accessories for men, women,
and children that reflect the American lifestyle and European fashion sensibilities.
The company’s apparel is marketed under various trademarks, including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, GUESS? and Triangle Design, MARCIANO, Question Mark and Triangle Design, a stylized G and a stylized M, GUESS Kids, Baby GUESS, YES, G by GUESS, GUESS by MARCIANO, and Gc.
The lines include full collections of clothing, including jeans, pants,
skirts, dresses, shorts, blouses, shirts, jackets, knitwear, and intimate
apparel. The company also grants licenses to manufacture and distribute a range
of products that complement its apparel lines, including eyewear, watches,
handbags, footwear, kids' and infants' apparel, leather apparel, swimwear,
fragrance, jewelry, and other fashion accessories.
The company’s products are sold through retail, wholesale, e-commerce,
and licensing distribution channels. Its primary customer is a style-conscious
consumer primarily between the ages of 18 and 32.
The company also appeals to customers outside this group through
specialty product lines that include GUESS by MARCIANO, a fashion line targeted
to women and men, and GUESS Kids, targeted to boys and girls ages 6 to 12.
As of January 28, 2012, the company directly operated a total of 504
stores in the U.S. and Canada and 251 stores outside of the U.S. and Canada, as
well as an additional 230 smaller-sized concessions in Asia and Europe.
As of January 28, 2012, its international licensees and distributors
operated 804 stores located outside the U.S. and Canada, as well as 119
smaller-sized licensee operated concessions located in Asia.
Segments The company’s segments, including Europe, North American
Retail, Asia, North American Wholesale, and Licensing. Europe In its Europe
segment, the company sells its products in 63 countries throughout Europe and
the Middle East through wholesale, retail, and e-commerce channels. European
Wholesale Distribution: The company’s European wholesale business generally
relies on smaller regional distributors and agents to distribute its products
primarily to smaller independent multi-brand boutiques.
The company’s products are also sold directly to department stores, such
as Galeries Lafayette, Printemps, and El Corte Inglès.
The company has showrooms in Barcelona, Dusseldorf, Munich, London,
Paris, Florence, and Lugano. It sells both its apparel and certain accessories
products under its GUESS? and GUESS by MARCIANO brand concepts through its
wholesale channel, operating primarily through two seasons, Spring/Summer and
Fall/Winter. Generally its Spring/Summer sales campaign is from May to
September with the related shipments occurring primarily from November to
April. The Fall/Winter sales campaign is from January to April with the related
shipments occurring primarily from May to October.
European Retail Network: The company’s European retail network comprises
a mix of directly operated and licensee operated GUESS? and GUESS by MARCIANO
retail and outlet stores, GUESS? Accessories stores, GUESS? Footwear stores and
GUESS? Kids stores.
As of January 28, 2012, the company had 179 directly operated stores and
382 licensee stores, excluding 17 smaller-sized concessions in Europe. During
2012, the company opened 45 new directly operated stores, 75 licensee stores
and 5 concessions.
Guess?, Inc. was founded in 1981 and is headquartered in Los Angeles,
California.
Staff: 14,300
Operations & branches:
At the headquarters, we
find the corporate headquarters.
Shareholders:
The Company is quoted with the NYSE under symbol GES.
The MARCIANO family is owner of 30% of the stock.
As 06-29-2012, 66% of the stock is held by institutional and mutual fund
owners, including:
|
FMR LLC |
8.20% |
|
ROYCE &
ASSOCIATES, LLC |
4.55% |
|
FIDELITY
LOW-PRICED STOCK FUND |
4.46% |
|
FRANKLIN
RESOURCES, INC |
4.14% |
|
VANGUARD GROUP,
INC. (THE) |
3.45% |
|
PERKINS
INVESTMENT MANAGEMENT, LLC |
2.91% |
Management:
Maurice MARCIANO, Chairman
Mr. Maurice Marciano co-founded Guess? Inc. in 1981 and has been its Chairman
of the Board since January 28, 2012. Mr. Marciano served as Chairman and Chief
Executive Officer of Guess? Inc. from August 1993 to November 15,1999. He
served as Co-Chief Executive Officer of Guess? Inc. from November 15,1999 to
January 8, 2007. Mr. Marciano served as President of Guess? Inc. from June 1990
to September 1992 and as Executive Vice President from 1981 until June 1990.
From February 1993 to May 1993, he served as Chief Executive Officer and
Chairman of Pepe Clothing USA, Inc. He served as an Executive Chairman of
Guess? Inc. from January 1, 2007 to January 28, 2012 and Director from May 1993
to January 28, 2012.
Mr. Marciano's direct supervisory responsibilities included design,
merchandising and manufacturing.
He served as Chairman of Guess? Inc. since May 2, 2003 and served as
Co-Chairman from November 15, 1999 to January 1, 2007.
Paul MARCIANO III, Vice Chairman and CEO
Mr. Paul Marciano is a co-founder of Guess? Inc. and has been its Chief
Executive Officer since January 8, 2007. Mr. Marciano served as Co-Chief
Executive Officer of Guess? Inc., from November 15, 1999 to January 8, 2007. He
served as Senior Executive Vice President of Guess Inc. from August 1990 to
September 1992 and served as Creative Director for Guess Inc.'s advertising
worldwide, and served as its President and Chief Operating Officer from
September 1992 to December 2000.
Mr. Marciano's responsibilities include direct supervisory
responsibility for Guess Inc.'s global advertising and image, licensing,
international business and the retail operation. Additionally, Mr. Marciano,
along with Maurice Marciano, is responsible for Guess Inc.'s corporate
marketing.
He has been a Vice Chairman of Guess? Inc., since January 8, 2007.
Mr. Marciano served as Co-Chairman of Guess? Inc. from November 15, 1999
to December 31, 2006.
Mr. Marciano has been a Director of Guess Inc. since 1990.
Carlos ALBERINI, President and COO
Carlos Alberini joined the Company in December 2000 as President and
Chief Operating Officer. In addition, from May 2006 until July 2006, Mr.
Alberini served as Interim Chief Financial Officer of the Company. Prior to
joining the Company, Mr. Alberini served as Senior Vice President and Chief
Financial Officer of Footstar, Inc. from October 1996 to December 2000.
Michael PRINCE is the COO.
Mr. J. Michael Prince has been the Chief Operating Officer of Guess?
Inc. since November 15, 2010.
Mr. Prince joined Guess? Inc. from Nike, Inc., where he served since 2009
as Chief Financial Officer of the Nike affiliates division, which manages a
portfolio of global lifestyle and sports brands.
Mr. Prince held the same position for Converse, Inc., a Nike subsidiary,
from 2006 to 2009, and was Vice President of Finance for Converse, Inc. from
2005 to 2006. Mr. Prince's other experience includes serving as Vice President,
Corporate Finance at BancFirst Corporation from 2003 to 2005 and as a Senior
Auditor with PricewaterhouseCoopers, LLP from 1993 to 1997.
Mr. Prince received a Masters of Business Administration degree from the
Fuqua School of Business at Duke University.
Dennis R. SECOR is the CFO
Subsidiaries &
Partnership: Several in the U.S. and worldwide
On attachment:
- 10K 2011
- 2nd 10 Q 2012
On 08-22-2012, Guess? Inc. announced consolidated earnings results for
the second quarter and six months ended July 28, 2012. For the quarter, the
company reported net revenue of $635,393,000 against $677,159,000 for the same
period a year ago. Earnings from operations were $57,301,000 against
$93,529,000 for the same period a year ago. Earnings before income taxes were
$63,161,000 against $96,344,000 for the same period a year ago.
Net earnings were $42,949,000 against $61,810,000 for the same period a
year ago. Net earnings attributable to company were $42,899,000 against
$60,657,000 for the same period a year ago. Basic and diluted earnings per
share were $0.49 against $0.65 for the same period a year ago.
Adjusted earnings from operations were $57,301,000 against $112,992,000
for the same period a year ago. Adjusted net earnings attributable to company
were $42,899,000 or $0.49 per diluted share against $78,270,000 or $0.84 per
diluted share for the same period a year ago. For the six months, the company
reported net revenue of $1,214,659,000 against $1,269,403,000 for the same
period a year ago. Earnings from operations were $96,442,000 against
$164,462,000 for the same period a year ago. Earnings before income taxes were
$103,180,000 against $158,165,000 for the same period a year ago. Net earnings
were $70,162,000 against $105,394,000 for the same period a year ago. Net
earnings attributable to company were $69,545,000 against $103,339,000 for the
same period a year ago. Diluted earnings per share were $0.78 against $1.11 for
the same period a year ago. Adjusted earnings from operations were $96,442,000
against $183,925,000 for the same period a year ago. Adjusted net earnings
attributable to company were $69,545,000 or $0.78 per diluted share against $120,952,000
or $1.30 per diluted share for the same period a year ago. Net cash provided by
operating activities was $44,653,000 against $88,377,000 for the same period a
year ago.
The company provided earnings guidance for the third quarter ending
October 27, 2012 and for the fiscal year ending February 2, 2013.
For the third quarter, the company expects consolidated net revenues are
expected to range from $620 million to $630 million. Operating margin is
expected to be between 9.0% and 9.5%. Diluted earnings per share are expected
to be in the range of $0.42 to $0.46.
For the full year, the company expects consolidated net revenues are
expected to range from $2.62 billion to $2.65 billion.
Operating margin is expected to be between 10.5% and 11.0%. Diluted
earnings per share are expected to be in the range of $2.15 to $2.30. For the
full year, the company reduced its CapEx plans and now expects to invest
between $110 million and $120 million in capital, net of tenant allowances,
primarily for new stores and remodels.
The company announced that its board of directors has approved a
quarterly cash dividend of $0.20 per share on the company's common stock.
The dividend will be payable on September 21, 2012 to shareholders of
record at the close of business on September 5, 2012.
On August 31, 2012, Guess? Inc. increased its borrowing capacity under
the Credit Agreement from $200 million to $300 million by exercising the
accordion feature in the Credit Agreement pursuant to a Lender Joinder Agreement
(the Accordion Joinder) with JPMorgan Chase Bank, N.A., as administrative
agent, and the lenders party thereto.
Also on August 31, 2012, the company entered into an Amendment to the
Credit Agreement with the lenders party thereto to provide for access to a new
$100 million accordion feature, subject to certain conditions and the
willingness of existing or new lenders to assume such increased amount and (ii)
greater flexibility in certain of the Company's covenants under the Credit
Agreement.
Banks: JPMorgan Chase
Legal filings
& complaints:
As of today date, there is no legal filing pending with the District
Courts.
Secured debts summary (UCC):
Several
Trade references:
Date reported: September 2012
High credit: USD 150,000
Now owing: 0
Past due: 0
Last purchase: August 2012
Line of business: Office supply
Paying status: On terms
Date reported: September 2012
High credit: USD 25,000,000+
Now owing: 0
Past due: 0
Last purchase: August 2012
Line of business: Payroll
Paying status: As agreed
Date reported: September 2012
High credit: USD 50,000+
Now owing: 0
Past due: 0
Last purchase: August 2012
Line of business: Telecommunications
Paying status: On terms
Domestic credit history:
Domestic credit history
appears as follow:
|
Monthly Payment Trends - Recent Activity |
|
National Credit Bureaus
gave a satisfying credit rating.
According to our credit analysts, during the last 6 months, payments are
made on due date.
International
credit history:
Payments of imports are currently made on terms.
Other comments:
The Company maintains a
regular business.
The banks and financial
institutions confirmed a satisfying credit history.
The Company is in good
standing.
This means that all local
and federal taxes were paid on due date.
The risk is low.
Our opinion:
A business connection may
be conducted.
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+'.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.52.96 |
|
UK Pound |
1 |
Rs.85.45 |
|
Euro |
1 |
Rs.69.46 |
INFORMATION DETAILS
|
Report Prepared
by : |
MNL |
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.