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Report No. : |
345228 |
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Report Date : |
23.10.2015 |
IDENTIFICATION DETAILS
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Name : |
WAL-MART STORES, INC. |
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Registered Office : |
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Country : |
United State |
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|
|
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Financial (as on) : |
31.07.2015 (Consolidated) |
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Date of Incorporation : |
1945 |
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Legal Form : |
Public Company (NYSE = WMT) |
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Line of Business : |
Subject operates retail stores in various formats worldwide. The company
operates in three segments: Walmart |
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No. of Employee : |
2,200,000 |
RATING & COMMENTS
|
MIRA’s Rating : |
Aaa |
|
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 |
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Status : |
Excellent |
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Payment Behaviour : |
Regular |
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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 – March 31, 2015
|
Country Name |
Previous Rating (31.12.2014) |
Current Rating (31.03.2015) |
|
United State |
A1 |
A1 |
|
Risk Category |
ECGC
Classification |
|
Insignificant |
A1 |
|
Low |
A2 |
|
Moderate |
B1 |
|
High |
B2 |
|
Very High |
C1 |
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Restricted |
C2 |
|
Off-credit |
D |
UNITED STATE ECONOMIC OVERVIEW
The US
has the most technologically powerful economy in the world, with a per capita
GDP of $54,800. US firms are at or near the forefront in technological advances,
especially in computers, pharmaceuticals, and medical, aerospace, and military
equipment; however, their advantage has narrowed since the end of World War II.
Based on a comparison of GDP measured at Purchasing Power Parity conversion
rates, the US economy in 2014, having stood as the largest in the world for
more than a century, slipped into second place behind China, which has more
than tripled the US growth rate for each year of the past four decades.
In the
US, 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.
Long-term
problems for the US 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.
The
onrush of technology has been a driving factor in 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. But the globalization of trade, and especially
the rise of low-wage producers such as China, has put additional downward
pressure on wages and upward pressure on the return to capital. 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 and oil has a major impact on the
overall health of the economy. 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, the US Congress established a $700 billion
Troubled Asset Relief Program (TARP) in October 2008. 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 2014, the direct costs of the wars totaled
more than $1.5 trillion, 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 dropped below 6.5% or inflation rose 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 ended the purchases during the summer of 2014. In
2014, the unemployment rate dropped to 6.2%, and continued to fall to 5.5% by
mid-2015, the lowest rate of joblessness since before the global recession
began; inflation stood at 1.7%, and public debt as a share of GDP continued to
decline, following several years of increase.
|
Source
: CIA |
Company name: WAL-MART STORES, INC.
Address: 702 SW 8th Street, Bentonville, AR 72716 - USA
Telephone: +1
479-273-4000
Fax: +1 479-273-4053
Website: www.walmartstores.com
Corporate ID#: 0732109
State: Delaware
Judicial form: Public Company (NYSE = WMT)
Date founded: 10-31-1969
Date founded: 1945
Stock: 3,220,548,651
shares of common stock outstanding
(as of June 3, 2015)
Value: USD
0.10 par value
Name of manager: C.
Douglas McMILLON
Business:
Wal-Mart Stores, Inc. operates retail stores in various formats
worldwide. The company operates in three segments: Walmart
U.S., Walmart International, and Sam's Club. It
operates retail stores, restaurants, discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, apparel
stores, Sam’s Clubs, neighborhood markets, and other small formats, as well as
walmart.com; and samsclub.com.
The company’s stores offer meat, produce, deli, bakery, dairy, frozen
foods, alcoholic and nonalcoholic beverages, and floral and dry grocery; health
and beauty aids, baby products, household chemicals, paper goods, and pet
supplies; and electronics, toys, cameras and supplies, photo processing
services, cellular phones, cellular service plan contracts and prepaid
service, movies, music, video games, and
books.
Its stores also provide stationery, automotive accessories, hardware and
paint, sporting goods, fabrics and crafts, and seasonal merchandise; pharmacy
and optical services, and over-the-counter drugs; shoes, jewelry, accessories,
and apparel for women, girls, men, boys, and infants; and home furnishings, housewares and small appliances, bedding, home décor,
outdoor living, and horticulture products.
In addition, the company’s stores offer tobacco, tools and power
equipment, office supplies, office and home furniture, grills, gardening
products, toys, seasonal items, mattresses, and small appliances; and wireless,
software, video games, movies, and music products, as well as operate gasoline
stations, and tire and battery centers. Further, it operates banks that provide
consumer financing programs; and offers financial services and related
products, including money orders, prepaid cards, wire transfers, check cashing,
and bill payment.
As of August 26, 2015, it operated 11,462 stores under 71 banners in 27
countries; and e-commerce Websites in 11 countries.
Wal-Mart Stores, Inc. was founded in 1945 and is based in Bentonville,
Arkansas.
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.
EIN: 71-0415188
Staff: 2,200,000
Operations & branches:
At the headquarters, we
find the corporate office, warehouse and supermarket, owned.
As of August 26, 2015, it operated 11,462 stores under 71 banners in 27
countries.
Shareholders:
The Company is quoted with the NYSE under symbol WMT.
As of 06-31-2015, 30% of the stock was held by institutional and mutual
fund owners including:
|
Vanguard Group, Inc. (The) |
3.06% |
|
State Street Corporation |
2.11% |
|
Berkshire Hathaway, Inc |
1.88% |
|
BlackRock Institutional
Trust Company, N.A. |
1.31% |
|
Dodge & Cox Inc |
0.95% |
Management:
C. Douglas McMILLON has been the Chief
Executive Officer and President of Wal-Mart Stores Inc. since February 1, 2014.
He served as the President and Chief Executive Officer of Wal-Mart
International Operations at Wal-Mart Stores from February 1, 2009 to February
1, 2014. He served as an Executive Vice President of Wal-Mart Stores Inc. since
August 4, 2005. He served as the Chief Executive Officer and President of SAM'S
West, Inc., (alternate name Sam's Club) from August 4, 2005 to April 3, 2009.
He was responsible for the overall corporate strategy and direction of Sam's
Club.
Mr. McMillon served as an Executive Vice
President of Merchandising and Replenishment of Sam's Club of Wal Mart Stores Inc. until August 2005.
He worked two consecutive summers as an Associate at the Wal-Mart
Distribution Centers in Northwest Arkansas. He served as a Buyer Trainee for
Wal-Mart working in Store #894 in Tulsa, OK. Mr. McMillon
served as a Buyer for Food and Candy, Ladieswear and
Crafts, a Divisional Merchandise Manager for Home Furnishings and Infants and
Toddlers, Vice President and General Merchandise Manager at Sam’s Club
International and Senior Vice President and General Merchandise Manager at
Wal-Mart Stores Inc. oversaw purchases for Toys, Electronics, Video Games,
Photo, Sporting Goods, Stationary and Office Supplies. Mr. McMillon
serves as a Director of National Chapter of Students in Free Enterprise (SIFE).
He has been a Director of Wal-Mart Stores Inc. since November 2013 and Wal-Mart
de Mexico SAB De CV since 2009. He serves as Director of US-China Business
Council, Inc. He serves on the Executive Board of Directors of Center of
Retailing Excellence at the University of Arkansas and on the Corporate Board
of Advisors for National Council at La Raza. He
served as Director of Massmart Holdings Ltd. from
June 20, 2011 to August 20, 2012. He has been recognized as a Young Global
Leader by the World Economic Forum.
Mr. McMillon graduated from the University of
Arkansas in Fayetteville, with a Bachelor of Science in Business Administration
(BSBA) in Accounting. He received an M.B.A. in Finance from the University of
Tulsa.
Charles M. HOLLEY Jr. is Executive Vice President and CFO.
Subsidiaries &
Partnership: Numerous in the U.S. and worldwide.
|
Currency in |
As of: |
Jan 31 |
Jan 31 |
Jan 31 |
Jan 31 |
|
Revenues |
446,509.0 |
468,651.0 |
476,294.0 |
485,651.0 |
|
|
NET INCOME |
15,699.0 |
16,999.0 |
16,022.0 |
16,363.0 |
|
On attachment:
- 10K 2014-2015
- 2nd 10Q 2015
On August 18, 2015, Wal-Mart Stores Inc. reported unaudited
consolidated earnings results for the second quarter and six months ended July
31, 2015.
For the quarter, the company reported total revenues of $120,229 million
against $120,125 million a year ago. Operating income was $6,069 million
against $6,740 million a year ago. Income from continuing operations before
income taxes was $5,526 million against $6,202 million a year ago. Consolidated
net income attributable to the company was $3,475 million against $4,093
million a year ago. Diluted net income per common share attributable to the
company was $1.08 against $1.26 year ago. Income from continuing operations
attributable to the company was $3,475 million or diluted net income per common
share of $1.08 compared to $3,923 million or diluted net income per common
share of $1.21 for the same period last year.
For the six months, the company reported total revenues of $235,055
million against $235,085 million a year ago. Operating income was $11,749
million against $12,933 million a year ago. Income from continuing operations
before income taxes was $10,382 million against $11,827 million a year ago.
Consolidated net income attributable to the company was $6,816 million against
$7,686 million a year ago. Diluted net income per common share attributable to
the company was $2.11 against $2.37 year ago. Income from continuing operations
attributable to the company was $6,816 million or diluted net income per common
share of $2.11 compared to $7,505 million or diluted net income per common
share of $2.31 for the same period last year. Net cash provided by operating
activities was $10,102 million against $11,900 million a year ago. Payments for
property and equipment were $5,044 million against $5,113 million a year ago.
Free cash flow was $5.1 billion against $6.8 billion a year ago. The decrease
in free cash flow was due to lower income from continuing operations and the
impact of the timing of payments. For the third quarter of fiscal 2016, the
company expects earnings per share to range between $0.93 and $1.05.
For the full year fiscal 2016, the company updated EPS guidance to a
range of $4.40 to $4.70 from a previous range of $4.70 to $5.05. Effective tax rate
is expected to range between 32% and 34%, unchanged from the guidance in
February.
Banks: The Bank of New York Mellon
Legal filings
& complaints:
There are numerous legal cases pending with various Courts.
Secured debts summary (UCC):
Several
Trade references:
Date reported: June 2015
High credit: USD 100,000+
Now owing: 0
Past due: 0
Last purchase: May 2015
Line of business: Office supply
Paying status: 3 days terms
Date reported: June 2015
High credit: USD 3 billion (over)
Now owing: 0
Past due: 0
Last purchase: May 2015
Line of business: Payroll
Paying status: As agreed
Date reported: June 2015
High credit: USD 8,000+
Now owing: 0
Past due: 0
Last purchase: May 2015
Line of business: Telecommunications
Paying status: 2 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 |
||
|
02/15 |
$62,151,400 |
86% |
13% |
1% |
0% |
0% |
|
03/15 |
$89,565,100 |
86% |
11% |
2% |
1% |
0% |
|
04/15 |
$38,208,800 |
87% |
10% |
2% |
1% |
0% |
|
05/15 |
$43,420,700 |
88% |
10% |
1% |
1% |
0% |
|
06/15 |
$30,798,700 |
88% |
11% |
1% |
0% |
0% |
|
07/15 |
$82,426,600 |
87% |
12% |
1% |
0% |
0% |
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.
International
credit history:
Payments of imports are currently made on terms.
Other comments:
The Company is in good
standing.
This means that all local
and federal taxes were paid on due date.
The risk remains low.
Our opinion:
A business connection may
be conducted.
Standard
& Poor’s
|
United
States of America Long-Term Rating Lowered To 'AA+' Due To Political Risks,
Rising Debt Burden; Outlook Negative |
|
Publication
date: 05-Aug-2011 20:13:14 EST |
·
We have lowered our long-term sovereign credit rating on the United
States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term
rating.
·
We have also removed both the short- and long-term ratings
from CreditWatch negative.
·
The downgrade reflects our
opinion that the fiscal consolidation plan that Congress and the Administration
recently agreed to falls short of what, in our view, would be necessary to
stabilize the government's medium-term debt dynamics.
·
More broadly, the downgrade
reflects our view that the effectiveness, stability, and
predictability of American policymaking and political institutions have
weakened at a time of ongoing fiscal and economic challenges to a degree more
than we envisioned when we assigned a negative outlook to the rating on April
18, 2011.
·
Since then, we have changed our
view of the difficulties in bridging the gulf between the political parties
over fiscal policy, which makes us pessimistic about the capacity of Congress
and the Administration to be able to leverage their agreement this week into a
broader fiscal consolidation plan that stabilizes the government's debt
dynamics any time soon.
·
The outlook on the long-term
rating is negative. We could lower the long-term rating to 'AA' within the next
two years if we see that less reduction in spending than agreed to, higher
interest rates, or new fiscal pressures during the period result in a higher
general government debt trajectory than we currently assume in our base case.
TORONTO (Standard &
Poor's) Aug. 5, 2011--Standard & Poor's Ratings Services said today that it
lowered its long-term sovereign credit rating on the United States of America
to 'AA+' from 'AAA'. Standard & Poor's also said that the outlook on the
long-term rating is negative. At the same time, Standard & Poor's affirmed
its 'A-1+' short-term rating on the U.S. In addition, Standard & Poor's
removed both ratings from CreditWatch, where they
were placed on July 14, 2011, with negative implications.
The transfer and
convertibility (T&C) assessment of the U.S.--our assessment of the
likelihood of official interference in the ability of U.S.-based public- and
private-sector issuers to secure foreign exchange for
debt service--remains
'AAA'.
We lowered our long-term
rating on the U.S. because we believe that the prolonged controversy over
raising the statutory debt ceiling and the related fiscal policy debate
indicate that further near-term progress containing the growth in public
spending, especially on entitlements, or on reaching an agreement on raising
revenues is less likely than we previously assumed and will remain a
contentious and fitful process. We also believe that the fiscal consolidation
plan that Congress and the Administration agreed to this week falls short of
the amount that we believe is necessary to stabilize the general government
debt burden by the middle of the decade.
Our lowering of the
rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our
criteria (see "Sovereign
Government Rating Methodology and Assumptions ," June 30, 2011,
especially Paragraphs 36-41). Nevertheless, we view the U.S. federal
government's other economic, external, and monetary credit attributes, which
form the basis for the sovereign rating, as broadly unchanged.
We have taken the ratings
off CreditWatch because the Aug. 2 passage of the
Budget Control Act Amendment of 2011 has removed any perceived immediate threat
of payment default posed by delays to raising the government's debt ceiling. In
addition, we believe that the act provides sufficient clarity to allow us to
evaluate the likely course of U.S. fiscal policy for the next few years.
The political brinksmanship
of recent months highlights what we see as America's governance and
policymaking becoming less stable, less effective, and less predictable than
what we previously believed. The statutory debt ceiling and the threat of
default have become political bargaining chips in the debate over fiscal
policy. Despite this year's wide-ranging debate, in our view, the differences
between political parties have proven to be extraordinarily difficult to
bridge, and, as we see it, the resulting agreement fell well short of the
comprehensive fiscal consolidation program that some proponents had envisaged
until quite recently. Republicans and Democrats have only been able to agree to
relatively modest savings on discretionary spending while delegating to the Select
Committee decisions on more comprehensive measures. It appears that for now,
new revenues have dropped down on the menu of policy options. In addition, the
plan envisions only minor policy changes on Medicare and little change in other
entitlements,
the containment of which
we and most other independent observers regard as key to long-term fiscal
sustainability.
Our opinion is that
elected officials remain wary of tackling the structural issues required to
effectively address the rising U.S. public debt burden in a manner consistent
with a 'AAA' rating and with 'AAA' rated sovereign peers (see Sovereign
Government Rating Methodology and Assumptions," June 30, 2011,
especially Paragraphs 36-41). In our view, the difficulty in framing a
consensus on fiscal policy weakens the government's ability to manage public
finances and diverts attention from the debate over how to achieve more
balanced and dynamic economic growth in an era of fiscal stringency and
private-sector deleveraging (ibid). A new political
consensus might (or might not) emerge after the 2012 elections, but we believe
that by then, the government debt burden will likely be higher, the needed
medium-term fiscal adjustment potentially greater, and the inflection point on
the U.S. population's demographics and other age-related spending drivers
closer at hand (see "Global
Aging 2011: In The U.S., Going Gray Will Likely Cost Even More Green, Now,"
June 21, 2011).
Standard & Poor's
takes no position on the mix of spending and revenue measures that Congress and
the Administration might conclude is appropriate for putting the U.S.'s
finances on a sustainable footing.
The act calls for as much
as $2.4 trillion of reductions in expenditure growth over the 10 years through
2021. These cuts will be implemented in two steps: the $917 billion agreed to
initially, followed by an additional $1.5 trillion that the newly formed
Congressional Joint Select Committee on Deficit Reduction is supposed to
recommend by November 2011. The act contains no measures to raise taxes or
otherwise enhance revenues, though the committee could recommend them.
The act further provides
that if Congress does not enact the committee's recommendations, cuts of $1.2
trillion will be implemented over the same time period. The reductions would
mainly affect outlays for civilian discretionary spending, defense, and
Medicare. We understand that this fall-back mechanism is designed to encourage
Congress to embrace a more balanced mix of expenditure savings, as the
committee might recommend.
We note that in a letter
to Congress on Aug. 1, 2011, the Congressional Budget Office (CBO) estimated
total budgetary savings under the act to be at least $2.1 trillion over the
next 10 years relative to its baseline assumptions. In updating our own fiscal
projections, with certain modifications outlined below, we have relied on the CBO's latest "Alternate Fiscal Scenario" of June
2011, updated to include the CBO assumptions contained in its Aug. 1 letter to
Congress. In general, the CBO's "Alternate
Fiscal Scenario" assumes a continuation of recent Congressional action overriding
existing law.
We view the act's
measures as a step toward fiscal consolidation. However, this is within the
framework of a legislative mechanism that leaves open the details of what is
finally agreed to until the end of 2011, and Congress and the Administration
could modify any agreement in the future. Even assuming that at least $2.1
trillion of the spending reductions the act envisages are implemented, we
maintain our view that the U.S. net general government debt burden (all levels
of government combined, excluding liquid financial assets) will likely continue
to grow. Under our revised base case fiscal scenario--which we consider to be
consistent with a 'AA+' long-term rating and a negative outlook--we now project
that net general government debt would rise from an estimated 74% of GDP by the
end of 2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of
sovereign indebtedness is high in relation to those of peer credits and, as
noted, would continue to rise under the act's revised policy settings.
Compared with previous
projections, our revised base case scenario now assumes that the 2001 and 2003
tax cuts, due to expire by the end of 2012, remain in place. We have changed
our assumption on this because the majority of Republicans in Congress continue
to resist any measure that would raise revenues, a position we believe Congress
reinforced by passing the act. Key macroeconomic assumptions in the base case
scenario include trend real GDP growth of 3% and consumer price inflation near
2% annually over the decade.
Our revised upside
scenario--which, other things being equal, we view as consistent with the
outlook on the 'AA+' long-term rating being revised to stable--retains these
same macroeconomic assumptions. In addition, it incorporates $950 billion of
new revenues on the assumption that the 2001 and 2003 tax cuts for high earners
lapse from 2013 onwards, as the Administration is advocating. In this scenario,
we project that the net general government debt would rise from an estimated
74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.
Our revised downside
scenario--which, other things being equal, we view as being consistent with a
possible further downgrade to a 'AA' long-term rating--features less-favorable
macroeconomic assumptions, as outlined below and also assumes that the second
round of spending cuts (at least $1.2 trillion) that the act calls for does not
occur. This scenario also assumes somewhat higher nominal interest rates for
U.S. Treasuries. We still believe that the role of the U.S. dollar as the key
reserve currency confers a government funding advantage, one that could change
only slowly over time, and that Fed policy might lean toward continued loose
monetary policy at a time of fiscal tightening. Nonetheless, it is possible
that interest rates could rise if investors re-price relative risks. As a
result, our alternate scenario factors in a 50 basis point (bp)-75
bp rise in 10-year bond yields relative to the base
and upside cases from 2013 onwards. In this scenario, we project the net public
debt burden would rise from 74% of GDP in 2011 to 90% in 2015 and to 101% by
2021.
Our revised scenarios
also take into account the significant negative revisions to historical GDP
data that the Bureau of Economic Analysis announced on July 29. From our
perspective, the effect of these revisions underscores two related points when
evaluating the likely debt trajectory of the U.S. government. First, the
revisions show that the recent recession was deeper than previously assumed, so
the GDP this year is lower than previously thought in both nominal and real
terms. Consequently, the debt burden is slightly higher. Second, the revised
data highlight the sub-par path of the current economic recovery when compared
with rebounds following previous post-war recessions. We believe the sluggish
pace of the current economic recovery could be consistent with the experiences
of countries that have had financial crises in which the slow process of debt deleveraging in the private sector leads to a persistent
drag on demand. As a result, our downside case scenario assumes relatively
modest real trend GDP growth of 2.5% and inflation of near 1.5% annually going
forward.
When comparing the U.S.
to sovereigns with 'AAA' long-term ratings that we view as relevant
peers--Canada, France, Germany, and the U.K.--we also observe, based on our
base case scenarios for each, that the trajectory of the U.S.'s net public debt
is diverging from the others. Including the U.S., we estimate that these five
sovereigns will have net general government debt to GDP ratios this year
ranging from 34% (Canada) to 80% (the U.K.), with the U.S. debt burden at 74%.
By 2015, we project that their net public debt to GDP ratios will range between
30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at
79%. However, in contrast with the U.S., we project that the net public debt
burdens of these other sovereigns will begin to decline, either before or by
2015.
Standard & Poor's
transfer T&C assessment of the U.S. remains 'AAA'. Our T&C assessment
reflects our view of the likelihood of the sovereign restricting other public
and private issuers' access to foreign exchange needed to meet debt service.
Although in our view the credit standing of the U.S. government has
deteriorated modestly, we see little indication that official interference of
this kind is entering onto the policy agenda of either Congress or the
Administration. Consequently, we continue to view this risk as being highly
remote.
The outlook on the
long-term rating is negative. As our downside alternate fiscal scenario
illustrates, a higher public debt trajectory than we currently assume could
lead us to lower the long-term rating again. On the other hand, as our upside
scenario highlights, if the recommendations of the Congressional Joint Select
Committee on Deficit Reduction--independently or coupled with other
initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high
earners--lead to fiscal consolidation measures beyond the minimum mandated, and
we believe they are likely to slow the deterioration of the government's debt
dynamics, the long-term rating could stabilize at 'AA+'.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.65.15 |
|
|
1 |
Rs.100.53 |
|
Euro |
1 |
Rs.73.97 |
INFORMATION DETAILS
|
Analysis Done by
: |
KAR |
|
|
|
|
Report Prepared
by : |
ANK |
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.