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Report Date : |
07.10.2014 |
IDENTIFICATION DETAILS
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Name : |
MATERION CORPORATION |
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Registered Office : |
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Country : |
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Financials (as on) : |
27.06.2014 |
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Date of Incorporation : |
01.02.2000 |
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Legal Form : |
Public Company |
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Line of Business : |
·
Subject through its subsidiaries, produces and sells
engineered materials for use in electrical, electronic, thermal, and
structural applications. ·
Subject operates
in four segments: - Advanced Material Technologies - Performance Alloys - Beryllium and Composites - Technical Materials |
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No of Employees : |
2,671 |
RATING & COMMENTS
|
MIRA’s Rating : |
Ba |
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
Status : |
Good |
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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 1, 2014
|
Country Name |
Previous Rating (31.03.2014) |
Current Rating (01.06.2014) |
|
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
$49,800. 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. Crude 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 climbed another
50% between 2006 and 2008, and bank foreclosures more than doubled in the same
period. Besides dampening the housing market, soaring oil prices caused a drop
in the value of the dollar and a deterioration in the US merchandise trade
deficit, which peaked at $840 billion in 2008. The sub-prime mortgage crisis,
falling home prices, investment bank failures, tight credit, and the global
economic downturn 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. In 2012 the federal
government reduced the growth of spending and the deficit shrank to 7.6% of
GDP. Wars in Iraq and Afghanistan required major shifts in national resources
from civilian to military purposes and contributed to the growth of the budget
deficit and public debt. Through 2011, the direct costs of the wars totaled
nearly $900 billion, according to US government figures. US revenues from taxes
and other sources are lower, as a percentage of GDP, than those of most other
countries. In March 2010, President OBAMA signed into law the Patient
Protection and Affordable Care Act, a health insurance reform that was designed
to 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. In December 2012, the Federal Reserve Board (Fed) announced
plans to purchase $85 billion per month of mortgage-backed and Treasury
securities in an effort to hold down long-term interest rates, and to keep
short term rates near zero until unemployment drops below 6.5% or inflation
rises above 2.5%. In late 2013, the Fed announced that it would begin scaling
back long-term bond purchases to $75 billion per month in January 2014 and
reduce them further as conditions warranted; the Fed, however, would keep
short-term rates near zero so long as unemployment and inflation had not
crossed the previously stated thresholds. Long-term problems include stagnation
of wages for lower-income families, inadequate investment in deteriorating
infrastructure, rapidly rising medical and pension costs of an aging
population, energy shortages, and sizable current account and budget deficits.
|
Source
: CIA |
MATERION
CORPORATION
Address:
Telephone: +1
216-486-4200
Fax: +1 216-383-4091
Website: www.materion.com
Corporate ID#: 1128752
State: Ohio
Judicial form: Public Company (NYSE = MTRN)
Date incorporated: February
1, 2000
Date founded: 1931
Stock: 20,649,612
shares (as of 07-22-2014)
Value: No
par value
Name of manager: RICHARD
J. HIPPLE
Business:
Materion Corporation, through its subsidiaries, produces and sells
engineered materials for use in electrical, electronic, thermal, and structural
applications primarily in the United States, Europe, and Asia.
The company operates in four segments:
- Advanced Material Technologies,
- Performance Alloys,
- Beryllium and Composites,
- Technical Materials.
The Advanced Material Technologies segment offers precious,
non-precious, and specialty metal products, including vapor deposition targets,
frame lid assemblies, clad and precious metal preforms, high temperature braze
materials, ultra-fine wire, advanced chemicals, optics, performance coatings,
and microelectronic packages used in wireless, semiconductor, photonic, hybrid,
and other microelectronic applications
in the consumer electronics and telecommunications infrastructure markets, as
well as in medical, defense and science, energy, industrial components, and
automotive electronics.
The Performance Alloys segment provides strip products, such as thin
gauge precision strip and thin diameter rod and wire; bulk products, including
copper and nickel-based alloys manufactured in plate, rod, bar, tube, and other
customized forms; and beryllium hydroxide used for strip and bulk products.
The Beryllium and Composites segment offers beryllium-based metals, and
beryllium and aluminum metal matrix composites in rod, sheet, foil, and
customized forms; and beryllia alumina ceramic products.
The Technical Materials segment provides clad inlay and overlay metals,
precious and base metal electroplated systems, electron beam welded systems,
contour profiled systems, and solder-coated metal systems.
The company distributes its products through a combination of
company-owned facilities, and independent distributors and agents.
The company was formerly known as Brush Engineered Materials Inc. and
changed its name to Materion Corporation in 2011.
Materion Corporation was founded in 1931 and is headquartered in
Mayfield Heights, Ohio.
Office of the Foreign
Assets Control (OFAC):
The company is not listed on the OFAC list.
The Specially Designated Nationals (SDN) List is a publication of OFAC
which lists individuals and organizations with whom United States citizens and
permanent residents are prohibited from doing business.
Foreign suppliers include:
PRAXAIR PHP S.A.S
66 Boulevard de Thibaud. 31000 Toulouse, France
EIN: 34-1919973
Staff: 2,671
Operations & branches:
At the headquarters, we
find a factory, warehouse and office, owned.
The Company maintains
several branches in the U.S.
Shareholders:
The Company is listed with the NYSE under symbol MTRN.
As of 06-30-2014, 89% of the stock was held by institutional and mutual
fund owners, including:
|
Heartland Advisors Inc. |
9.79% |
|
Heartland Value Plus Fund |
9.44% |
|
Vanguard Group, Inc. (The) |
6.68% |
|
Gamco Investors Inc |
5.60% |
|
BlackRock Fund Advisors |
5.12% |
Management:
Richard J. HIPPLE has been the Chairman, Chief Executive Officer and
President at Materion Corporation and its subsidiary Brush Wellman, Inc., since
May 2, 2006. Mr. Hipple serves as the Chairman, Chief Executive Officer and
President of Brush Engineered Materials Inc. He served as the Chief Operating
Officer of Materion Corporation from May 2005 to May 2, 2006. He served as the
President of Alloy Products- Brush Wellman, Inc. from May 2002 to May 2005. He
has assumed executive management responsibility for all of Materion
Corporation's operating units including Alloy Products, Beryllium Products,
Technical Materials, Inc., and Williams Advanced Materials Inc. Mr. Hipple
joined Brush Wellman in July 2001 and served as its Vice President of Strip
Products from July 2001 to May 2002. Prior to Brush, he served as the President
of LTV Steel Company. Prior to running LTV's steel business, he held numerous
leadership positions in Engineering, Operations, Strategic Planning, Sales and
Marketing and Procurement since 1975 at LTV. He has been a Director of Ferro
Corp. since June 28, 2007 and of keyCorp since May 17, 2012. He serves as a
Trustee of Manufacturers Alliance/MAPI, Inc.
Mr. Hipple is a graduate of Drexel University with a Bachelor of Science
degree in Engineering in 1975.
John D. GRAMPA is the CFO.
Subsidiaries and
partnership:
|
Aerospace Metal Composites Limited |
England |
|
Materion Advanced Chemicals Inc. |
Wisconsin |
|
Materion Advanced Materials Technologies and Services Netherlands BV |
Netherlands |
|
Materion Advanced Materials Technologies and Services Suzhou Ltd. |
China |
|
Materion Advanced Materials Technologies and Services Corp. |
New Mexico |
|
Materion Advanced Materials Technologies and Services Far East PTE
Ltd. |
Singapore |
|
Materion Advanced Materials Technologies and Services Inc. |
New York |
|
Materion Advanced Materials Technologies and Services Shanghai Co.
Ltd. |
China |
|
Materion Advanced Materials Technologies and Services Taiwan Co. Ltd. |
Taiwan |
|
Materion Brewster LLC |
New York |
|
Materion Brush (Japan) Ltd. |
Japan |
|
Materion Brush (Singapore) PTE Ltd. |
Singapore |
|
Materion Brush GmbH |
Germany |
|
Materion Brush Inc. |
Ohio |
|
Materion Brush International Inc. |
Ohio |
|
Materion Brush Ltd. |
England |
|
Materion Ceramics Inc. |
Arizona |
|
Materion Czech S.R.O. |
Czech Republic |
|
Materion Ireland Limited |
Ireland |
|
Materion Large Area Coatings LLC |
Delaware |
|
Materion Natural Resources Inc. |
Utah |
|
Materion Precision Optics (Korea) LLC |
Korea |
|
Materion Precision Optics (Shanghai) Limited |
China |
|
Materion Precision Optics (Japan) GK |
Japan |
|
Materion Precision Optics (U.K.) Limited |
England |
|
Materion Precision Optics and Thin Film Coatings Corporation |
California |
|
Materion Precision Optics and Thin Film Coatings Inc. |
Massachusetts |
|
Materion Services Inc. |
Ohio |
|
Materion Technical Materials Inc. |
Ohio |
|
Materion Technologies Inc. |
Arizona |
On attachment:
- 10K 2013
- 2nd 10Q 2014
On Jul 24, 2014, Materion Corporation reported unaudited consolidated earnings
results for the second quarter and six months ended June 27, 2014.
For the quarter, net sales were $288.0 million, compared to $306.1
million for the second quarter of 2013. Value-added sales were $159.6 million,
up $7.1 million, or 5%, compared to value-added sales of $152.5 million for the
second quarter of 2013 and up sequentially 10% from the first quarter of 2014.
The growth in value-added sales in the second quarter compared to the same
period of last year was due primarily to stronger demand from customers in the
consumer electronics and medical markets, partially offset by lower demand from
customers in the automotive electronics and defense markets.
Operating profit was $14.6 million against $6.6 million last year.
Income before income taxes was $13.9 million against $5.7 million last
year.
Net income was $10 million or $0.47 per diluted share against $4.2
million or $0.20 per basic and diluted share last year. Non-GAAP operating
profit was $10.7 million against $6.6 million last year. Non-GAAP net income
was $7.5 million or $0.36 per diluted share against $4.2 million or $0.20 per
diluted share last year. Sales were down $18.1 million or 6% from second
quarter 2013 levels. Driven primarily by changes in precious metal, market
pricing and mix of customers supplied material. Net debt as at June 27, 2014,
was $62.3 million. For the six months, net sales were $546.9 million, compared
to $605.3 million last year. Operating profit was $25.6 million against $16.1
million last year. Income before income taxes was $24.3 million against $14.4
million last year. Net income was $17.3 million or $0.82 per diluted share
against $10.9 million or $0.52 per basic and diluted share last year. Net cash
used in operating activities was $1.5 million against net cash provided by
operating activities of $18.1 million last year. Payments for purchase of
property, plant and equipment was $12.9 million against $13.0 million last
year. Payments for mine development were $0.3 million against $4.4 million last
year. Year-to-date adjusted net income was $13.5 million, or $0.64 per share,
an increase of 23% over the comparable period of the prior year. Value-added
sales for the first six months of 2014 were $304.5 million compared to $303.8
million for the same period of last year. Due primarily to the weaker demand
from customers in the defense and automotive electronics markets, the company
is reducing its guidance for 2014 by approximately 12% to the range of $1.55
per share to $1.70 per share adjusted, an increase of 40% to 55% compared to
$1.10 per share in the prior year. Previous guidance was for $1.75 per share to
$1.95 per share. The revision is due to the two market specific issues that
drove the lower than expected first half results as well as to reflect the
lowered macroeconomic forecast. This range, which excludes the $0.17 EPS
benefit of the previously reported first quarter asset sale and second quarter
insurance settlement, represents an improvement of 40% to 55% over the
prior-year's adjusted earnings of $1.10 per share and an improvement of 40% to
60% from first half levels. The company fully anticipates meaningful positive
free cash flow from operations as they move through the remainder of 2014. The
company expects capital spending approximately $30 million and the full year
tax rate of 29%.
For the second half of 2014, adjusted earnings are now expected to be in
the range of $0.90 per share to $1.05 per share, up 40% to 60% from first half
levels and up approximately 70% from prior-year second half levels. The company
continues to expect significant increases in value-added sales, margins and
earnings in the second half when compared to both the prior-year's second half
and the current-year's first half.
For the third quarter of 2014, the company expects earnings per share to
be up from 15% to 25% from the second quarter level and in the range of $0.40
to $0.45 per share. The guidance, of course, excludes the earnings benefit of
the insurance settlement and the first quarter asset sale which, as noted
earlier, adds $0.17 a share to GAAP earnings.
Banks: JPMorgan Chase Bank
Legal filings & complaints:
As of today date, there is no legal filing pending with the Courts.
Secured debts summary (UCC):
Several
TRADE REFERENCES:
Date reported: September 2014
High credit: USD 60,000
Now owing: 0
Past due: 0
Last purchase: August 2014
Line of business: Office supply
Paying status: On terms
Date reported: September 2014
High credit: USD 3,500,000
Now owing: 0
Past due: 0
Last purchase: August 2014
Line of business: Payroll
Paying status: As agreed
Date reported: September 2014
High credit: USD 3,000
Now owing: 0
Past due: 0
Last purchase: August 2014
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 correct credit rating.
According to our credit analysts, during the last 6 months, domestic payments
were made with an average of 2 days beyond terms.
International
credit history:
Payments of imports are currently made on terms.
Other comments:
The Company maintains a
strong business.
The Company is in good
standing.
This means that all local
and federal taxes were paid on due date.
Last report was filed on
05-13-2014.
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.61.75 |
|
|
1 |
Rs.100.07 |
|
Euro |
1 |
Rs.77.95 |
INFORMATION DETAILS
|
Analysis Done by
: |
SUB |
|
|
|
|
Report Prepared
by : |
TPT |
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.