S&P’s Adelson Steps Down as Chief Credit Officer, Jacob Leaves in Shuffle

Friday, Dec09, 2011

Standard & Poor’s is replacing its chief credit officer, Mark Adelson, as the world’s largest ratings company winds down a year in which its grades of governments have faced growing scrutiny.

Adelson, 51, who oversaw an overhaul of S&P’s methodologies that was designed to address their failures during the collapse of the mortgage-bond market, will become a “senior research fellow,” the New York-based unit of McGraw-Hill Cos. said yesterday in a statement. Also, David Jacob, global head of structured finance, will depart at the end of the month.

The changes come three months after Douglas Peterson left Citigroup Inc. to become S&P’s president, following its decision to strip the U.S. of its top AAA ranking. This week, the firm warned it may downgrade Germany, France and 13 other European countries. Even as S&P’s moves roil credit markets, McGraw-Hill is planning to separate its financial businesses from its textbook publishing unit under pressure from hedge fund Jana Partners LLC.

“There are a lot of changes going on at McGraw-Hill broadly,” Peter Appert, an analyst who follows the company at Piper Jaffray & Co. in San Francisco, said in a telephone interview. Peterson has been discussing removing layers of management, he said.

Ian Thompson, who was previously responsible for the Asia- Pacific region, will replace Adelson, S&P said in the statement. Peterson, the former chief operating officer of Citibank NA, replaced Deven Sharma, who had led the unit since 2007.
Worked Together

Jacob and Adelson joined S&P in 2008 from Adelson & Jacob Consulting, where they worked together. Jacob took over a structured-finance business that was blamed by congressional investigators for contributing to the worst financial crisis since the Great Depression by assigning top grades to risky real-estate bonds.

Under Adelson, S&P revised the way it graded governments, banks and bonds backed by assets such as mortgages. The new criteria for structured finance were designed to be “tougher,” Adelson said in an undated video on S&P’s website. Any bonds carrying AAA ratings should be able to withstand stress similar to the Great Depression, Adelson wrote in a paper in 2009.

S&P downgraded the U.S. one step to AA+ on Aug. 5, saying that gridlock in Washington and the rising national debt were making it riskier to invest in government bonds. The cut was questioned by President Barack Obama, who said in a speech on Aug. 8 that the ratings company was basing its judgment on politics, not on the government’s ability to pay its debts.
Europe Warning

On Dec. 5, S&P warned that it may cut 15 euro nations as policy makers prepared to meet in Brussels to end a crisis that led to bailouts of Greece, Ireland and Portugal, and now threatens to engulf Italy.

European Central Bank governing council member Christian Noyer lambasted S&P.

“They changed their methodology and it’s now more linked to political factors and less to fundamentals,” Noyer said on Dec. 5 at a conference in Paris. “The rating agencies fueled the crisis in 2008 and we can question whether they’re not doing the same thing in the current crisis.”

Moritz Kraemer, S&P’s head of European sovereign ratings, denied that the company was trying to influence politics.
Deal Scuttled

In July, S&P withdrew grades it had assigned to a $1.5 billion offering of bonds backed by commercial mortgages from Goldman Sachs Group Inc. and Citigroup Inc., forcing the banks to scuttle the deal after it was placed with investors.

“The manner in which S&P took its action has severely eroded investor and issuer confidence in its ratings,” Morgan Stanley analysts led by Richard Parkus in New York wrote in a note on July 28.

Last month, after revising its bank criteria, S&P lowered its ratings of Goldman Sachs Group Inc., Bank of America Corp. and UBS AG.

Prior to consulting, Adelson was head of structured finance research at Nomura Securities International, according to a statement announcing his hiring.

S&P also said that it was looking to hire a new chief economist and chief risk officer. McGraw-Hill said on Dec. 7 it would eliminate 550 jobs at its education unit.

(sourced Bloomberg)

China Dagong agency downgrades US credit rating from A+ to A with negative outlook

Aug3,2011 - |sourced UTC

Chinese rating agency Dagong Global Credit Rating Co. said Wednesday it has cut the credit rating of the United States from A+ to A with a negative outlook after the U.S. federal government announced that the country's debt limit would be increased.

“The decision to lift the debt ceiling will not change the fact that the US national debt growth has outpaced that of its overall economy and fiscal revenue, which will lead to a decline in its debt-paying ability”, said Dagong Global in a statement.

The downgrade is a result of fights between U.S. political parties over debt issues, which reflects the government's inability to completely solve the debt problem, said Dagong Global.

“The interests of the country's creditors are short of systematic protection both politically and economically” underlined Dagong.

China is by far the largest foreign holder of US debt, with holdings amounting to 1.15 trillion U.S. dollars as of the end of April.

Dagong announced last month that it had put the U.S. credit rating on negative watch for a possible downgrade on expectations of a long-term economic recession in the world's largest economy, partially caused by its economic governance and policies.

Dagong downgraded the U.S. rating from AA to A+ in November of last year after the US government announced a second round of quantitative easing.

The agency said the approval to raise the debt ceiling indicated that there will not be any positive changes in factors that will influence the country's debt-paying ability in the long run.

The growth of the US new debts has so far outpaced the rate at which it reduces its fiscal deficit, as there are not reliable or feasible policies put in place to support the country's plan to cut federal spending, it said.

Dagong estimated that the United States has to reduce no less than 4 trillion dollars in its fiscal deficit in the coming five years to sustain its liability scale.

The federal government's 2.4 trillion dollars reduction plan reflects its unwillingness and inability to cut its deficit and reduce debt, which in turn leads to the country's current credit rating, it said.

“The decline in the federal government's debt-paying ability is irreversible,” said the company, adding that the US Congress has not found a constructive way to increase the country's economic growth.

The agency forecast last month that the US economic expansion will slow to 2.5% annually for 2011 and 2012, with monetary and fiscal policies being forced to tighten and drivers of inner growth remaining weak.

Credit rating agency Moody's also put the U.S. AAA credit rating under review for a potential downgrade last month on rising tensions over the country's borrowing limit.

Moody's reviews Nippon Steel Corp. ratings for possible downgrade

Apr 4, 2011 8:24am GMT

April 4 (Reuters) - Nippon Steel Corporation (5401.T: Quote)

* Moody's reviews Nippon Steel Corp. ratings for possible downgrade

(sourced Reuters)

FITCH affirms Baosteel at A-, outlook stable

Mon Feb 14, 2011 6:13am GMT
(The following was released by the rating agency)

February 14 (Fitch) Fitch Ratings has affirmed China-based Baoshan Iron & Steel Company Limited's (Baosteel) Long-term foreign currency Issuer Default Rating (IDR) at 'A-' and Short-term foreign currency IDR at 'F2'. The Outlook is Stable

Using Fitch's Parent and Subsidiary rating Linkage methodology, the 'A-' IDR incorporates a one-notch uplift to Baosteel's standalone rating, reflecting the strong linkages between its state-owned parent Baosteel Group Corporation (BGC) and the Chinese government. This is based on BGC's and Baosteel's strategic importance to the country and potential support from the Chinese government should it be required. BGC, being the largest steel company held by the state-owned Assets Supervision and Administration Commission of the State Council, has been identified by the Chinese government to lead the restructuring of the country's steel industry - an important priority for China's industrialisation and urbanisation.

Baosteel's standalone rating reflects its position as the leading high value-add steel producer in China. The company has strong market share in its major products such as cold-rolled (CR) auto sheet (with 50% market share), home appliance sheet (37%), and pipeline steel (33%). CR coil products, stainless steel products, and steel tubes contributed to 52% of revenues in 2009. Despite weak CR steel product prices in 2010, Baosteel continued to generate robust revenue and operating profit growth. The company's high average selling price (ASP) for its steel products of CNY6,300 in 2010, based on Fitch estimates, was 26% higher than in 2009, suggesting that Baosteel has continued to enhance its product offerings with high value-added steel products.

Baosteel has maintained a stable financial profile despite a volatile operating environment between 2007 and 2010, relative to other Chinese steel producers and most global steel companies. Baosteel's EBITDA margin ranged from a low of 14% in 2009 to a high of 18% in 2010, whereas Angang Steel Co Ltd's and Wuhan Iron & Steel Co's EBITDA margin over the same period ranged from 24% in 2007 to 12% in 2009 and from 24% in 2007 to 11% in 2010 respectively. Capex and dividend payment have been reduced in response to the decline in EBITDA in 2009, alongside working capital reduction, which helped reduce Baosteel's debt level. Adjusted net debt/operating EBITDAR fell to 1.52x for the LTM to September 2010 from 2.9x in 2009, after an improved operating environment lifted EBITDAR. Its EBITDA margin improved to 15.8% from 14% during the same period.

Fitch expects steel companies in 2011 at least to maintain their profitability as the steel price increase is likely to offset any raw material cost increases. Baosteel's strong market share in its major products suggests close working relationship with its customers, making it likely for the company to pass on any raw material cost increases to its customers. This is reflected in Baosteel's stable EBITDA margin.

The Stable Outlook reflects Fitch's expectations that the over-supply condition in the Chinese steel industry will improve with the government's restructuring drive and the restriction placed on building new steel plants. Aggressive capex and acquisition of production facilities resulting in declining unit profit or a higher debt burden, and in turn a net debt/EBITDAR exceeding 1.5x on a sustained basis may lead to negative rating action. The ratings may also come under pressure if BGC's support is insufficient to offset a deterioration in the credit profile of Baosteel or if state support for the company is deemed to have weakened. No positive rating action is envisaged in the next 12-18 months.
(sourced:Thomson Reuters)