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Report No. : |
308213 |
|
Report Date : |
21.02.2015 |
IDENTIFICATION DETAILS
|
Name : |
GENESCO, INC. |
|
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Registered Office : |
1415 Murfreesboro Pike, Nashville, TN 37217 |
|
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Country : |
United
States |
|
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Year of Establishment : |
1924 |
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Legal Form : |
Public Company |
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Line of Business : |
Subject operates as a retailer and wholesaler of branded footwear,
apparel and accessories. |
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No. of Employees : |
9,200 |
RATING & COMMENTS
|
MIRA’s Rating : |
B |
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
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26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
|
Status : |
Moderate |
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Payment Behaviour : |
Slow but correct |
|
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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 – December 31, 2014
|
Country Name |
Previous Rating (30.09.2014) |
Current Rating (31.12.2014) |
|
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 |
Company name: GENESCO, INC.
Headquarters: 1415 Murfreesboro Pike, Nashville, TN
37217 - USA
Telephone: +1
615-367-7000
Fax: +1 615-367-8278
Website: www.genesco.com
Corporate ID#: 12686
State: Tennessee
Judicial form: Public Company (NYSE = GCO)
Date incorporated: 10-19-1934
Date founded: 1924
Stock: 80,000,000
shares.
As of November 28, 2014, 24,078,058 shares
of the registrant’s common stock were outstanding.
Value: USD
1= par value
Name of manager: Robert
J. DENNIS
Business:
Genesco Inc. operates as a retailer and wholesaler of branded footwear,
apparel and accessories.
The company operates five segments: Journeys Group, Schuh Group, Lids
Sports Group, Johnston & Murphy Group, and Licensed Brands.
The Journeys Group segment includes Journeys, Journeys Kidz, Shi by
Journeys and Underground by Journeys retail stores, catalog and e-commerce
operations. As of February 1, 2014, Journeys Group operated 1,168 stores,
including 174 Journeys Kidz stores, 50 Shi by Journeys stores and 117
Underground by Journeys stores averaging approximately 1,875 square feet,
throughout the United States and in Puerto Rico and Canada, selling footwear
and accessories for young men, women and children.
Journeys stores target customers in the 13 to 22 year age group through
the use of youth-oriented decor and multi-channel media. Journeys stores carry
predominately branded merchandise across a range of prices. The Journeys Kidz
retail footwear stores sell footwear and accessories primarily for younger
children aged 5 to 12. Shi by Journeys retail footwear stores sell footwear and
accessories to a target customer group consisting of fashion-conscious women in
their early 20’s to mid 30’s. Underground by Journeys retail footwear stores
sell footwear and accessories primarily for men and women in the 20 to 35 age
group.
The Lids Sports Group segment comprises headwear and accessory stores
under the Lids name and other names in the U.S., Puerto Rico and Canada; the
Lids Locker Room and Lids Clubhouse businesses, consisting of sports-oriented
fan shops featuring an array of licensed merchandise, such as apparel, hats and
accessories, sports decor and novelty products, operating under various trade
names; licensed team merchandise departments in Macy's department stores
operated under the name Locker Room by Lids and on macys.com, under a license
agreement with Macy's; e-commerce operations; and an athletic team dealer
business operating as Lids Team Sports. As of February 1, 2014, Lids Sports
Group operated 1,133 stores, including 930 Lids stores, 177 Lids Locker Room
and Clubhouse stores and 26 Locker Room by Lids leased departments, averaging
approximately 1,200 square feet, throughout the United States and in Puerto
Rico and Canada. The core headwear stores and kiosks, located in malls,
airports, street-level stores and factory outlet stores throughout the United
States and in Puerto Rico and Canada, target customers in the early-teens to
mid-20’s age group. The stores offer headwear from an assortment of college,
MLB, NBA, NFL and NHL teams, as well as other specialty fashion categories. The
Lids Locker Room and Lids Clubhouse stores, operating under various trade
names, located in malls and other locations primarily in the United States,
target sports fans of all ages. These stores offer headwear, apparel,
accessories and novelties representing an assortment of college and
professional teams.
The Schuh Group segment comprises the Schuh retail footwear chain and
e-commerce operations. As of February 1, 2014, this segment operated 95 Schuh
stores, averaging approximately 5,000 square feet, which include both
street-level and mall locations in the United Kingdom and the Republic of
Ireland. As of February 1, 2014, Schuh Group operated four Schuh Kids stores
averaging 2,425 square feet. Schuh stores target men and women in the 15 to 30
age group, selling a range of branded casual and athletic footwear along with a
private label offering.
The Johnston & Murphy Group segment includes retail stores, catalog
and e-commerce operations and wholesale distribution. All of the Johnston &
Murphy wholesale sales are of the Genesco-owned Johnston & Murphy brand and
all of the group’s retail sales are of Johnston & Murphy branded products.
Johnston & Murphy Retail Operations: As of February 1, 2014, Johnston &
Murphy operated 168 retail shops and factory stores throughout the United States and in Canada averaging approximately
1,825 square feet and selling footwear, apparel and accessories primarily for
men in the 35to 55 age group, targeting business and professional customers. Women’s
footwear and accessories are sold in select Johnston & Murphy locations.
Johnston & Murphy retail shops are located primarily in malls and airports
nationwide, and sell a range of men’s dress and casual footwear, apparel and
accessories. The company also sells Johnston & Murphy products directly to
consumers through an e-commerce Website and a direct mail catalog. Johnston
& Murphy Wholesale Operations: Johnston & Murphy men’s and women's
footwear and accessories are sold at wholesale, primarily to better department
and independent specialty stores.
Johnston & Murphy’s wholesale customers offer the brand’s footwear
for dress, dress casual, and casual occasions, with the majority of styles
offered in these channels. Additionally, the company relaunched the Trask
brand, with men's and women's footwear and leather accessories offered
primarily through better independent retailers and department stores, an
e-commerce Website and catalog.
The Licensed Brands segment comprises Dockers Footwear, sourced and
marketed under a license from Levi Strauss & Company; SureGripFootwear,
occupational footwear primarily sold directly to consumers; and other brands.
Licensed Brands sales are footwear marketed under the Dockers brand, for which
the company has had the exclusive men’s footwear license in the United States.
Dockers footwear is marketed to men aged 30 to 55 through the same national
retail chains that carry Dockers slacks and sportswear, and in department and
specialty stores across the country.
The company acquired Keuka Footwear in 2011 and subsequently launched
its SureGrip Footwear line of slip-resistant, occupational footwear from that
base. The company sources and distributes the SureGrip line to employees in the
hospitality, healthcare, and other industries.
The company owns its Johnston & Murphy, H.S. Trask, Keuka and
SureGrip brands and owns or licenses the trade names of its retail concepts
either directly or through wholly-owned subsidiaries. The Dockers brand
footwear line is sold under a license agreement granting the company the exclusive
right to sell men’s footwear under the trademark in the United States, Canada
and Mexico and in certain other Latin American countries. Seasonality The
company's business is seasonal with its investment in inventory and accounts
receivable normally reaching peaks in the spring and fall of each year. History
Genesco Inc. was founded in 1924.
The Company is using the
following registered names:
- Undergroup by Journeys
- Journeys Kids
- Shi by Journeys
- Undergroup Station Shoe
Store
- Johnston & Murphy
- Journeys
EIN: 62-0211340
Staff: 9,200
Operations & branches:
At the headquarters, we
find a large warehouse, office and store, owned.
On December 5, 2014, Genesco Inc. announced that it plans to open or acquire
165 stores at fiscal 2015. The company plans to end fiscal 2015 with 2,658
stores.
The company's current plan is to close 47 stores during the year
The Company maintains a
JOHNSTON store located:
4008 Reliable Parkway
Chicago, IL 60686
Shareholders:
The Company is listed with the NYSE under symbol GCO.
As of December 31, 2014, 98% of the stock is held by institutional and
mutual fund owners, including:
|
FMR, LLC |
14.96% |
|
Eagle Asset Management Inc |
11.96% |
|
Royce & Associates, LLC |
8.40% |
|
Vanguard Group, Inc. (The) |
6.43% |
|
BlackRock Fund Advisors |
5.63% |
Management:
Robert J. DENNIS is the Chairman, President and CEO.
Born in 1955
Robert J. Dennis, Bob has been the Chairman of the Board of Genesco Inc.,
holding company of Hat World Corporation since April 1, 2010, Chief Executive
Officer since August 1, 2008 and President since October 2006. Mr. Dennis
served as Senior Vice President of Genesco Inc. from June 2004 to October 26,
2005 and Chief Operating Officer and Executive Vice President from October 26,
2005 to October 2006. Mr. Dennis served as the Chairman and Chief Executive
Officer of Hat World Corporation since 2001. Prior to joining Hat World, Mr.
Dennis served as Executive Vice President of Asbury Automotive Group. Inc.,
from 1997 to 1999 and as an Independent Consultant since 1999. He served as the
Chairman and Chief Executive Officer of Lids Corporation. From 1984 to 1997, he
was a Partner of McKinsey & Company, where Mr. Dennis served as a Co-Head
of the North American Retail Practice. He has been a Director of Genesco Inc.
since October 2006. He served as a Director of Hat World Corp.
Mr. Dennis holds a Master of Business Administration degree with
distinction from the Harvard Business School with a focus on Consumer Marketing
and Bachelor's and Master's degrees in Biochemical Engineering and Organic
chemistry, with honors from Rensselaer Polytechnic Institute.
Subsidiaries & Partnership:
|
Names of Subsidiary |
|
Incorporation |
|
Owned by
Registrant |
|
|||
|
|
||||||||
|
Flagg Bros. of Puerto Rico, Inc. |
|
Delaware |
||||||
|
Genesco Brands, LLC |
|
Delaware |
||||||
|
GVI, Inc. |
|
Delaware |
||||||
|
Hat World Corporation |
|
Delaware |
||||||
|
GCO Canada Inc. |
|
Minnesota |
||||||
|
Hat World, Inc. |
|
Minnesota |
||||||
|
Hat World Services Co., Inc. |
|
Delaware |
||||||
|
Keuka Footwear, Inc. |
|
Delaware |
||||||
|
SIOPA Sports of America, LLC (50% owned) |
|
Delaware |
||||||
|
Genesco (UK) Limited |
|
United Kingdom |
||||||
|
Lids Retail Limited |
|
United Kingdom |
||||||
|
Schuh Group Limited |
|
United Kingdom |
||||||
|
Schuh (Holdings) Limited |
|
United Kingdom |
||||||
|
Schuh Limited |
|
United Kingdom |
||||||
|
Schuh (ROI) Limited |
|
Republic of Ireland |
||||||
|
Genesco GP, LLC |
|
United Kingdom |
||||||
|
Genesco Scot LP |
|
United Kingdom |
||||||
|
Genesco (Jersey) Limited |
|
Jersey |
||||||
On attachment:
- 10K (fiscal year ending
January 2014)
- 3rd 10Q 2014
On February 12, 2015, Genesco Inc. has reported that comparable sales,
which include both stores and direct sales, increased 10% for the three months
ended January 3, 2015, compared to the same period of 2013.
Same-store sales for the three months ended January 3, 2015 increased
9%, compared to the same period of 2013.
For the fiscal year ending January 31, 2015, the company expects
earnings from continuing operations to be in the range of $92.35 million to
$95.03 million and earnings per share to be in the range of $3.9 to $4.01.
The company is maintaining its most recently announced expectations for
adjusted earnings per share in the range of $4.75 to $4.85 for the fiscal year
ending January 31, 2015.
Banks: Bank of America
Legal filings
& complaints: Several
Secured debts
summary (UCC): Numerous
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 to 5 days beyond terms.
We noted a net increase of accounts payable during the last 3rd
10Q and a decrease in cash.
Our “recovery department” received debt recoveries.
Other comments:
The Company is in good standing.
This means that all local
and federal taxes were paid on due date.
Last report was filed on
04-23-2014.
Our opinion:
We suggest you to be
careful.
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.62.26 |
|
|
1 |
Rs.96.01 |
|
Euro |
1 |
Rs.70.72 |
INFORMATION DETAILS
|
Analysis Done by
: |
KAR |
|
|
|
|
Report Prepared
by : |
NIT |
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.