|
Report Date : |
29.01.2013 |
IDENTIFICATION DETAILS
|
Name : |
BRIGHTCOVE INC. |
|
|
|
|
Registered Office : |
290 Congress Street, 4th floor, Boston, MA 02210 |
|
|
|
|
Country : |
United States |
|
|
|
|
Date of Incorporation : |
24.08.2004 |
|
|
|
|
Legal Form : |
Public Company |
|
|
|
|
Line of Business : |
Subject provides cloud-based solutions for publishing and distributing
professional digital media |
|
|
|
|
No. of Employees : |
334 |
RATING & COMMENTS
|
MIRA’s Rating : |
B |
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
|
Status : |
Moderate |
|
|
|
|
Payment Behaviour : |
Slow but correct |
|
|
|
|
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) |
|
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 |
Company name: BRIGHTCOVE INC.
Address: 290 Congress Street, 4th
floor, Boston, MA 02210 - USA
Telephone: +1 617-500-4947
Fax: +1 617-395-8352
Website: www.brighcove.com
Corporate ID#: 3844933
State: Delaware
Judicial form: Public Company (Nasdaq = BCOV) since
02-15-2012.
Date incorporated: 08-24-2004
Stock value:
|
|
Par Value Per
Share |
Total Authorized
by Articles
|
Total Issued |
|||
|
Common |
$0.00100 |
68,000,000 |
$68,000.00 |
5,224,532 |
||
|
Preferred |
$0.00100 |
5,375,000 |
$5,375.00 |
5,375,000 |
||
|
Preferred |
$0.00100 |
7,000,000 |
$7,000.00 |
6,921,854 |
||
|
Preferred |
$0.00100 |
7,392,163 |
$7,392.16 |
7,392,163 |
||
|
Preferred |
$0.00100 |
2,315,842 |
$2,315.84 |
2,315,842 |
||
Name of manager: Jeremy ALLAIRE
Business:
Brightcove Inc. provides cloud-based solutions for publishing and
distributing professional digital media.
The company offers Brightcove Video Cloud, an online video platform that
enables its customers to publish and distribute video to Internet-connected
devices. Its Brightcove Video Cloud platform offers various features and
functionalities, such as uploading and encoding, content management, video
players, multi-platform video experiences, live video streaming, distribution
and syndication, social media, advertising and monetization, and integrated
video analytics.
The company also intends to provide Brightcove App Cloud to develop,
deploy, and manage content applications on smartphones, tablets, and other
Internet-connected devices.
Brightcove Inc. provides its solutions to media, retail, technology, and
financial services companies, as well as governments, educational institutions,
and non-profit organizations in North America, Europe, and the Asia Pacific.
The company was formerly known as Video Marketplace, Inc. and changed
its name to Brightcove Inc. on 03-21-2005.
Brightcove Inc. was founded in 2004 and is headquartered in Cambridge,
Massachusetts.
No name of foreign suppliers available.
EIN: 20-1579162
Staff: 334
Operations & branches:
At the headquarters, we
find the corporate office, on lease.
The Company maintains
branches/subsidiaries located:
Ebisu LITE Bldg. 2F
3-1-19 Ebisuminami, Shibuya-ku
Tokyo 150-0022 Japan
245 Park Avenue
39th Floor
New York, NY 10167
149 9th Street
Suite 300
San Francisco, CA 94103 USA
200 West Mercer Street
Suite 204
Seattle, WA 98119
41-44 Great Queen Street
London WC2B 5AD
UK
26-28 Rue de Londres
75009 Paris
France
Bahnhofstrasse 8
30159 Hannover, Germany
Avenida Diagonal 640, planta 6
08017 Barcelona, Spain
1 Fullerton Road #02-01
One Fullerton
Singapore 049213
Level 4, 95 Pitt Street
Sydney NSW 2000
Australia
#1642, 16F Gangnam Bldg.
1321-1 Seocho-dong, Seocho-gu
Seoul, South Korea 137-070
Shareholders:
Since 02-15-2012, the Company is
listed with the Nasdaq under symbol BCOV.
27% of the stock is held by
institutional and mutual fund owners, including:
|
WELLS FARGO & COMPANY |
6.89% |
|
WELLS FARGO ADVANTAGE EMERGING GROWTH FD |
3.84% |
|
PRICE (T.ROWE) ASSOCIATES INC |
3.72% |
|
TCW GROUP, INC. (THE) |
3.72% |
|
FEDERATED INVESTORS, INC. |
3.34% |
|
EMERALD ADVISERS |
2.74% |
Management:
Jeremy ALLAIRE is the Chairman, President, Director and CEO.
Mr. Jeremy D. Allaire serves as a Mentor at TechStars, LLC. Mr. Allaire
Founded Brightcove, Inc. in April 2004 and serves as its Chief Executive
Officer and Chairman since 2004. Mr. Allaire is Founder Emeritus Macromedia.
Mr. Allaire served as Special Advisor to the Board of Ping Identity
Corporation. Prior to founding Brightcove, he worked as a technologist and
entrepreneur-in-residence for Cambridge, MA-based venture capital firm General
Catalyst, where he worked on companies and investments in broadband media,
mobile content, e-commerce software and digital identity.
Mr. Allaire was Technologist-in-Residence at General Catalyst Partners
and focused on identifying new investment opportunities for General Catalyst in
the areas of software infrastructure, enterprise software applications and
Internet technology. He served as Chief Technology Officer of Macromedia, Inc.
He joined Macromedia in 2001, when it merged with Allaire Corporation. He served
as Chief Technology Officer of Allaire Corporation since January 2000. He had
been affiliated with Allaire Corporation since June 1995. From June 1995 until
his appointment as Chief Technology Officer, he held a number of positions of
increasing responsibility at Allaire, including Vice President of Technology
Strategy and Director of Technology Strategy. Through his work at Allaire and
Macromedia, he helped define Rich Internet Applications. He serves as Chairman
of Brightcove, Inc. He serves a Member of Advisory board of AdKeeper, Inc. He
serves as a Director of Brightcove, Inc. and Ping Identity Corporation. He
serves as a Member of Advisory Board of AdKeeper Inc. Mr. Allaire serves as an
Advisor of Visible Measures Corporation. He served as a Director of Maven
Networks, Inc. He served as a Director of Zingdom Communications, Inc.
(formerly, Convoq, Inc.). He served as a Director of General Catalyst Partners.
He served as a Board Member of Massachusetts Innovation & Technology
Exchange, Inc. (alternate name Massachusetts Interactive Media Coalition
(MIMC)), New England's largest industry association for professionals focused
on opportunities created by Internet technology, as well as privately-held
Lexington, MA-based Applied Messaging. He is a regular author and analyst of
Internet technologies.
He has spoken at numerous industry conferences and seminars, including
PC Forum, Supernova, Internet World, Comdex, Flashforward, Web Builder,
Macromedia DevCon and Demo. He holds a Bachelors of Arts in Political Science
and Philosophy from Macalester College in St. Paul, Minnesota.
David M. MENDELS is Director and COO.
Mr. David R. Mendels has been president and chief operating officer of
Brightcove, Inc. since January 2010. Mr. Mendels served as Senior Vice President
and General Manager of Adobe Macromedia Software LLC. (Formerly
known as Macromedia Inc.) since January 2004. Mr. Mendels was
responsible for Adobe Macromedia's MX products, including Flex, Flash,
Dreamweaver and ColdFusion. At Macromedia, Mr. Mendels also served as executive
vice president and general manager, leading product development, marketing, and
alliances including the setup and launch of international operations in Latin
America and Japan. Mr. Mendels joined Adobe Macromedia in April 1992 and served
numerous sales, marketing and general management positions. Mr. Mendels served
as Senior Vice President of Business Productivity Business Unit of Adobe
Systems Inc. until April 30, 2008. Mr. Mendels served as Senior Vice President
of Enterprise and Developer Solutions Business Unit of Adobe Systems Inc. since
December 2005. Mr. Mendels led Adobe's development of comprehensive, integrated
technologies and solutions for enterprises and developers.
He was responsible for products such as the Adobe® LiveCycle™ line of
server software, enabling organizations to deploy solutions that effectively
create, capture and integrate information and processes across the extended
enterprise, and Macromedia® Flex™ product line, helping developers and
enterprise develop and deploy applications that combine the richness of the
desktop with the reach of the web. He served as Executive Vice President of
Macromedia's tool and server product division. Mr. Mendels began his career in
Macromedia's International Department in 1992. He led Macromedia's Japan field
operations including all sales and marketing. Mr. Mendels served positions of
running business development and alliances, general management of a number of
Macromedia product groups since 1995, where he played a major role in
Macromedia's product and business development for more than 10 years. He has
nearly two decades of experience as a general manager, corporate strategist,
thought leader, and deal maker focused on making the Internet easier to use for
consumers and developers. Mr. Mendels has been a Director of Brightcove, Inc.
since January 2009. He serves as a Member of Advisory Board of Allurent Inc.
Mr. Mendels holds a Bachelor's Degree in East Asian studies from Wesleyan
University and a Master's of Arts degree in Japanese studies from the
University of California at Berkeley.
Other Directors include Deb BESEMER, James BREYER, Scott KURNIT,
Elizabeth NELSON, and David ORFAO
Christopher MENARD is Executive Vice President and CFO.
Subsidiaries
And partnership:
At September 30, 2012, the Company had seven wholly-owned subsidiaries:
Brightcove UK Ltd,
Brightcove Singapore Pte. Ltd.,
Brightcove Korea,
Brightcove Australia Pty Ltd,
Brightcove Holdings, Inc.,
Bright Bay Co. Ltd.
Zencoder Inc.
On August 14, 2012, the Company acquired Zencoder, a privately-held
company located in San Francisco, California, which provides cloud-based media
encoding services
On attachment:
- 3rd 10Q 2012.
Third Quarter 2012 Financial Highlights:
Revenue: Total revenue for the third quarter of 2012 was $22.1 million,
an increase of 32% compared to $16.7 million for the third quarter of 2011.
Subscription and support revenue was $21.5 million, an increase of 35%
compared with $15.9 million for the third quarter of 2011. Professional
services and other revenue was $0.6 million, a decrease compared to $0.8
million for the third quarter of 2011.
Gross Profit: Gross profit for the third quarter of 2012 was $15.1
million, compared to $11.4 million for the third quarter of 2011. Non-GAAP
gross profit for the third quarter of 2012 was $15.3 million, representing a
year-over-year increase of 34% and a non-GAAP gross margin of 69%.
Operating Loss: Loss from operations was $3.7 million for the third
quarter of 2012, compared to a loss of $3.3 million for the third quarter of
2011. Non- GAAP loss from operations, which excludes stock-based compensation
expense, the amortization of acquired intangibles and merger-related expenses,
was $1.3 million for the third quarter of 2012, an improvement compared to a
non-GAAP
loss from operations of $2.2 million during the third quarter of 2011.
Net Loss: Net loss attributable to common stockholders was $0.6 million,
or $0.02 per basic and diluted share, for the third quarter of 2012. This
compares to a net loss attributable to common stockholders of $5.4 million, or
$1.09 per basic and diluted share, for the third quarter of 2011.
Non-GAAP net loss attributable to common stockholders, which excludes
stock-based compensation expense, the amortization of acquired intangibles,
merger- related expenses, merger-related income tax adjustments and the
accretion of dividends on redeemable
convertible preferred stock, was $1.5 million for the third quarter of 2012, or $0.05 per basic and
diluted share, compared to a non-GAAP
net loss attributable to common stockholders of $2.9 million for the third quarter of 2011, or $0.59 per basic
and diluted share.
Balance Sheet and Cash Flow: As of September 30, 2012, Brightcove had $30.8
million of cash, cash equivalents and investments, a decrease from $58.6
million at June 30, 2012. The decrease in cash was driven primarily by the
$27.2 million used for the acquisition of Zencoder.
Brightcove used $5 thousand in cash from operations and invested $1.4
million in capital expenditures, leading to the use of free cash flow of $1.4
million for the third quarter of 2012. Free cash flow was ($5.5) million for
the third quarter of 2011.
Banks: Silicon Valley Bank
Legal
filings & complaints:
State: Massachusetts
Case number: :12-cv-11213-MLW
Plaintiff: Videoshare LLC
Defendant: Brightcove Inc.
Mark L. Wolf, presiding
Date filed: 07/19/2012
Date of last filing: 01/23/2013
Cause : Patent infringement
State: Texas
Case number: 6:12-cv-00576-MHS
Plaintiff: Blue Spike, LLC
Defendant: Brightcove Inc. et al
Michael H. Schneider, presiding
Date filed: 08/27/2012
Date of last filing: 01/15/2013
Cause: Patent infringement
Secured debts summary (UCC): None
Haut du formulaire
Trade references:
Date reported: December 2012
High credit: USD 12,000
Now owing: 0
Past due: 0
Last purchase: November 2012
Line of business: Office supply
Paying status: 6 days beyond terms
Date reported: December 2012
High credit: USD 400,000+
Now owing: 0
Past due: 0
Last purchase: November 2012
Line of business: Payroll
Paying status: As agreed
Date reported: December 2012
High credit: USD 600
Now owing: 0
Past due: 0
Last purchase: November 2012
Line of business: Telecommunications
Paying status: 5 days beyond 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 |
||
|
08/12 |
$63,100 |
51% |
41% |
8% |
0% |
0% |
|
09/12 |
$56,300 |
51% |
49% |
0% |
0% |
0% |
|
10/12 |
$73,300 |
62% |
36% |
2% |
0% |
0% |
|
11/12 |
$46,700 |
96% |
1% |
3% |
0% |
0% |
|
12/12 |
$43,800 |
96% |
1% |
3% |
0% |
0% |
|
01/13 |
$58,500 |
73% |
27% |
0% |
0% |
0% |
National Credit Bureaus
gave a medium credit rating.
According to our credit analysts, during the last 6 months, 71% of trade
experience indicates a regular payment.
Payments are usually made with an average of 5 to 10 days beyond terms.
Other comments:
The Company maintains a
regular business.
The Company is in good
standing.
This means that all local
and federal taxes were paid on due date.
The risk is medium.
Our opinion:
A business connection may
be conducted but we suggest you to check regularly the way of payments.
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 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.53.89 |
|
|
1 |
Rs.84.92 |
|
Euro |
1 |
Rs.72.51 |
INFORMATION DETAILS
|
Report Prepared
by : |
SDA |
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.