|
Report Date : |
25.01.2013 |
IDENTIFICATION DETAILS
|
Name : |
PVH CORP. |
|
|
|
|
Registered Office : |
200 Madison Avenue, New York, NY 10016 |
|
|
|
|
Country : |
United States |
|
|
|
|
Date of Incorporation : |
08.04.1976 |
|
|
|
|
Legal Form : |
Public Company |
|
|
|
|
Line of Business : |
The company designs, sources, and markets sportswear, footwear,
athletic apparel, underwear, robes, sleepwear, eyewear, sunwear, watches, handbags, men’s
tailored clothing, men’s dress furnishings, socks, small leather goods,
fragrances, home and bedding products, bathroom accessories, and luggage,
etc. |
|
|
|
|
No. of Employees : |
10,900 |
RATING & COMMENTS
|
MIRA’s Rating : |
A |
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
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 |
|
Status : |
Good |
|
Payment Behaviour : |
No Complaints |
|
Litigation : |
Exist |
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) |
|
United
States |
A1 |
A1 |
|
Risk Category |
ECGC
Classification |
|
Insignificant |
A1 |
|
Low |
A2 |
|
Moderate |
B1 |
|
High |
B2 |
|
Very High |
C1 |
|
Restricted |
C2 |
|
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 |
PHILIPS VAN HEUSEN CORP
On 06-23-2011, name changed to PVH CORP.
Company name: PVH CORP
Address: 200 Madison Avenue, New
York, NY 10016 - USA
Headquarters: 200 Madison Avenue, New York, NY
10016 - USA
Telephone: 212-381-3500
Fax: 212-381-3960
Website: www.phv.com
Corporate ID#: 0823142
State: Delaware
Judicial form: Public Company (NYSE = PVH)
Date founded: April 8, 1976
Date founded: 1881
Stock: 70,646,029 shares outstanding as of
11-19-2012
Value: USD 1= par value
Name of manager: Emmanuel
CHIRICO
Business:
PVH Corp. operates as an apparel company in the United States, Canada,
Europe, and internationally.
The company designs, sources, and markets sportswear, footwear, athletic
apparel, underwear, robes, sleepwear,
eyewear, sunwear, watches, handbags, men’s tailored clothing, men’s
dress furnishings, socks, small leather goods, fragrances, home and bedding
products, bathroom accessories, and luggage; and jeanswear, bags, accessories,
jewelry, watches, home furnishings, hosiery, women’s performance apparel, dress
shirts, and neckwear.
Its brand portfolio includes owned brands comprising designer lifestyle
brands, such as Calvin Klein and Tommy Hilfiger brands, as well as Van Heusen,
IZOD, Bass, ARROW, and Eagle; and licensed brands consisting of Geoffrey Beene,
Kenneth Cole New York, Kenneth Cole Reaction, Sean John, JOE Joseph Abboud, MICHAEL
Michael Kors, Michael Kors Collection, CHAPS, Donald J. Trump Signature
Collection, DKNY, Elie Tahari, Nautica, Ted Baker, J. Garcia, Claiborne, Robert
Graham, U.S. POLO ASSN., Axcess, and Jones New York, as well as various other
licensed and private label brands. The company is also involved in licensing
its owned brands over a range of products. PVH Corp. markets its products
through wholesale to national and regional department, mid-tier department,
mass market, and specialty and independent stores; and retail stores, as well
as through e-commerce Website. It leases and operates approximately 1,000
retail locations.
The company was formerly known as Phillips-Van Heusen Corporation and
changed its name to PVH Corp. in June 2011.
PVH Corp. was founded in 1881 and is based in New York, New York.
EIN: 13-1166910
Staff: 10,900
Operations & branches:
At above address, we find
the corporate office of the group.
The Company leases and
operates about 1,000 stores.
The address given on your order
1001 Frontier Road, Bridgewater, NJ 08807
is a distribution center
Ph: 908-231-6660
Shareholders:
The Company is listed with the NYSE under symbol PVH.
95% of the stock is held by institutional and mutual fund owners
including:
|
FMR LLC |
11.54% |
|
GOLDMAN SACHS GROUP INC |
7.82% |
|
VANGUARD GROUP, INC. (THE) |
4.74% |
|
BANK OF NEW YORK MELLON CORPORATION |
3.54% |
|
PRICE (T.ROWE) ASSOCIATES INC |
3.35% |
|
STATE STREET CORPORATION |
3.13% |
Management:
Emmanuel CHIRICO is the Chairman and CEO.
Emanuel Chirico, Manny has been the Chief Executive Officer of
Phillips-Van Heusen Corporation since February 27, 2006. Mr. Chirico served as
the Chairman of the Board and Chief Executive Officer of Superba Inc.
Mr. Chirico served as Chief Financial Officer of Phillips-Van Heusen
Corp., since 1999 and its President and Chief Operating Officer since June 14,
2005. Mr. Chirico served as an Executive Vice President of Phillips-Van Heusen
Corporation since 1999 and joined as its Vice President and Controller since in
1993. Prior to Phillips- Van Heusen, Mr. Chirico was a Partner at Ernst &
Young LLC. Mr. Chirico has been the Chairman of Phillips-Van Heusen Corp. since
June 2007 and its Director since June 14, 2005. He has been a Director of
Dick's Sporting Goods Inc., since December 4, 2003. He serves as a Director of
American Apparel & Footwear Association. He served as a Director of
Superba, Inc.
Michael A. SHAFFER, COO, CFO and Executive Vice President
Mr. Michael A. Shaffer has been Chief Operating & Financial Officer
of Phillips-van Heusen Corp. since February 2006 and has been its Executive
Vice President of Finance since 2005. Mr. Shaffer served as Chief Financial
Officer and Executive Vice President of Superba, Inc. He served as Senior Vice
President of Retail Operation of Phillips-van Heusen, where he joined in 1990.
Subsidiaries &
Partnership:
Financial reports on
attachment:
- 10K 2011
- 3rd 10Q 2012
On November 27, 2012
PVH Corp. reported consolidated earnings results for the third quarter
and nine months ended October 28, 2012.
Earnings per share were $2.34 on a non-GAAP basis, which exceeded the
company's guidance and represents a 24% increase over the prior year period's
non-GAAP earnings per share of $1.89. GAAP earnings per share were $2.24 and
represent a 45% increase over the prior year period's GAAP earnings per share of
$1.54. Revenue of $1.643 billion decreased 1% as compared to the prior year
period due to a 5% negative impact attributable to the exit from the Izod
women's and Timberland wholesale sportswear businesses (worth approximately $50
million) and foreign currency translation (worth approximately $40 million). On
a non-GAAP basis, earnings before interest and taxes increased 10% to $250.4
million from $227.3 million in the prior year's third quarter, including the
negative impact of approximately $10 million related to foreign currency
translation and a $3.3 million increase in corporate expenses due principally
to an increase in pension expense resulting from a decrease in discount rates.
Driving the overall increase in non-GAAP earnings before interest and taxes was
an increase of $18.9 million in the Tommy Hilfiger business, inclusive of
approximately $10 million negative impact due to foreign currency translation;
an increase of $6.3 million in the Calvin Klein business; and an increase of
$1.3 million in the Heritage Brands business. On a GAAP basis, earnings before
interest and taxes increased 21% to $237.4 million as compared to $196.8
million in the prior year's third quarter. The increase was due principally to
the net effect of the changes discussed above, combined with the net effect of
the absence of $20.7 million of expenses incurred in connection with the
company's buyout of the perpetual license for Tommy Hilfiger in India; a $2.7
million decrease in integration and restructuring costs associated with the
Tommy Hilfiger acquisition; and $6.4 million of costs incurred in the current
year's third quarter related to the pending acquisition of The Warnaco Group
Inc. Net sales were $1,501.442 million against $1,517.494 million a year ago.
Pre-tax income was $209.139 million against $165.300 million a year ago. On
non-GAAP basis, the company reported net income was $173.469 million or $2.34
diluted per share against $138.218 million or $1.89 diluted per share a year
ago. Net income was $165.409 million against $112.239 million a year ago.
For the nine-month period, the company reported earnings per share on a
non-GAAP basis were $4.90 as compared to $4.20 for the prior year. GAAP
earnings per share were $4.70 as compared to $3.25 for the prior year. Revenue
increased 1% to $4.407 billion, including a negative impact of 4% attributable
to foreign currency translation and the exited sportswear businesses. The
overall increase in revenue was due to the net impact of a 4%, or $90.9
million, increase in the Tommy Hilfiger business, including a negative impact
of approximately $100 million, or 4%, related to foreign currency translation.
A 6%, or $46.2 million, increase in the Calvin Klein business, driven primarily
by a 7% increase in comparable store sales within the company's Calvin Klein
outlet retail business and an 8% increase in the North American wholesale
business. A 7%, or $88.1 million, decrease in the Heritage Brands business,
including the negative impact of 5% related to the exited sportswear businesses.
On a non-GAAP basis, earnings before interest and taxes increased $14.4 million
to $560.2 million. This change resulted from a $52.5 million increase in the
Tommy Hilfiger business due principally to the revenue increase mentioned above
combined with an increase in gross margin due primarily to higher average unit
retail selling prices globally. A $3.2 million increase in the Calvin Klein
business attributed to the revenue increase discussed above, partially offset
by a planned decrease in gross margin resulting principally from the impact of
higher product costs experienced in the first half of the year. A $28.1 million
decrease in the Heritage Brands business due principally to the revenue
decrease mentioned above, combined with a planned decrease in
gross margin rates resulting principally from the impact of higher
product costs experienced in the first half of the year. A $13.2 million
decrease attributable to an increase in corporate expenses due principally to
additional pension expense resulting from lower discount rates. GAAP earnings
before interest and taxes increased $88.6 million to $539.3 million. Earnings
increased $98.5 million and $3.2 million in the Tommy Hilfiger and Calvin Klein
businesses, respectively, while earnings in the
Heritage Brands business decreased $21.0 million and corporate expenses
decreased $7.8 million. These earnings changes were due to the above-mentioned
items combined with lower integration, restructuring and debt modification
costs, partially offset by the $6.4 million of costs incurred in the current
year's third quarter related to the acquisition of Warnaco. Net sales were
$4,033.911 million against $4,002.210 million a year ago. Pre-tax income was
$453.446 million against $354.707 million a year ago. On non-GAAP basis, the
company reported net income was $360.959 million or
$4.90 diluted per share against $306.074 million or $4.20 diluted per
share a year ago. Net income was $346.225 million against $236.635 million a
year ago. The company provided earnings guidance for the fourth quarter and
full year of 2012. Fourth quarter revenue in 2012 is currently projected to
increase 4% to 5% as compared to the prior year's fourth quarter amount of
$1.533 billion. On a non-GAAP basis, earnings per share for the fourth quarter
is currently projected to be in the range of $1.48 to $1.49, including the
negative impact Hurricane Sandy had on business in the first half of November.
This represents an increase of 25% to 26% over $1.18 in the prior year's fourth
quarter. The company currently estimates that the fourth quarter 2012 effective
tax rate will be approximately 22.0%, which reflects the timing of certain
discrete tax benefits moving out of the fourth quarter and into the third
quarter, as previously mentioned. For the full year, revenue is projected to
increase approximately 2% as compared to $5.891 billion in 2011. On a non-GAAP
basis, earnings per share in 2012 is currently projected to be in the range of
$6.37 to $6.38, an increase of 18% to 19% over the 2011 amount of $5.38. The
company estimates that the 2012 effective tax rate will be approximately 23.5%.
Banks: Bank of America
JP Morgan Chase Bank
Legal filings
& complaints:
State: Georgia
Case number: 1:12-cv-04070-SCJ-WEJ
Plaintiff: Geraldine Perkins et al v.
Defendant: PVH Corp. et al
Steve C Jones, presiding
Walter E. Johnson, referral
Date filed: 11/21/2012
Date of last filing: 12/10/2012
Cause: Job discrimination
Secured debts summary (UCC):
Several including 2 in New York State
|
1. |
Debtor Names: |
PVH CORP. |
200 MADISON AVE, NEW YORK, NY 10016, USA |
|
|
Secured Party Names: |
ARROW ENTERPRISE COMPUTING SOLUTIONS |
800 WALNUT STREET, MAC F4031-040, DES
MOINES, IA 50309, USA |
|
|
|
|
|
|
File no. |
File Date |
Lapse Date |
Filing Type |
|
|
|
201202060073640 |
02/06/2012 |
02/06/2017 |
Financing Statement |
|
|
|
2. |
Debtor Names: |
PVH CORP. |
200 MADISON AVENUE, NEW YORK, NY 10016, USA |
|
|
Secured Party Names: |
ARROW ENTERPRISE COMPUTING SOLUTIONS |
800 WALNUT STREET, MAC F4031-040, DES
MOINES, IA 50309, USA |
|
|
|
|
|
|
File no. |
File Date |
Lapse Date |
Filing Type |
|
|
|
201203295361139 |
03/29/2012 |
03/29/2017 |
Financing Statement |
|
|
Trade references:
Date reported: November
2012
High credit: USD
60,000
Now owing: 0
Past due: 0
Last purchase: October
2012
Line of business: Office supply
Paying status: On
terms
Date reported: November
2012
High credit: USD
15,000,000+
Now owing: 0
Past due: 0
Last purchase: October
2012
Line of business: Payroll
Paying status: As
agreed
Date reported: November
2012
High credit: USD
50,000
Now owing: 0
Past due: 0
Last purchase: October
2012
Line of business: Telecommunications
Paying status: On
terms
Domestic credit history:
Domestic credit history
appears as follow:
|
Monthly Payment Trends - Recent Activity |
|
Date |
Up to 30 DBT |
31-60 DBT |
61-90 DBT |
>90 DBT |
||
|
07/12 |
$188,200 |
85% |
12% |
0% |
0% |
3% |
|
08/12 |
$225,400 |
86% |
7% |
2% |
0% |
5% |
|
09/12 |
$206,500 |
94% |
3% |
0% |
2% |
1% |
|
10/12 |
$255,800 |
67% |
20% |
0% |
0% |
13% |
|
11/12 |
$255,800 |
67% |
20% |
0% |
0% |
13% |
|
12/12 |
$236,100 |
93% |
2% |
0% |
0% |
5% |
National Credit Bureaus
gave a correct credit rating.
International
credit history:
Payments of imports are currently made with an average of 2 to 5 days
beyond terms.
Other comments:
The Company is developing a
strong business.
The bank confirmed
The Company is in good
standing.
This means that all local
and federal taxes were paid on due date.
The risk remains 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.53.85 |
|
UK Pound |
1 |
Rs.85.25 |
|
Euro |
1 |
Rs.71.72 |
INFORMATION DETAILS
|
Report Prepared
by : |
PRL |
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.