Good day and welcome, ladies and gentlemen, to the Moody's Corporation Second Quarter 2013 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Salli Schwartz, Global Head of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining us on this teleconference to discuss Moody's second quarter results for 2013. I am Salli Schwartz, Global Head of Investor Relations. This morning, Moody's released its results for the second quarter of 2013. The earnings press release and a presentation to accompany this teleconference are both available on our website at ir.moodys.com. Ray McDaniel, President and Chief Executive Officer of Moody's Corporation, will lead this morning's conference call. Also making prepared remarks on the call this morning is Linda Huber, Chief Financial Officer of Moody's Corporation. Before we begin, I call your attention to the Safe Harbor language, which can be found toward the end of our earnings release. Today's remarks may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the act, I also direct your attention to the Management's Discussion and Analysis section and the risk factors discussed in our annual report on Form 10-K for the year ended December 31, 2012, and in other SEC filings made by the company, which are available on our website and on the Securities and Exchange Commission's website. These, together with the Safe Harbor statements, set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements. I would also like to point out that members of the media may be on the call this morning in a listen-only mode. I'll now turn the call over to Ray McDaniel.

Thank you, Salli. Good morning, and thank you to everyone for joining today's call. I'll begin by summarizing Moody's second quarter 2013 results. Linda will follow with additional financial detail and operating highlights, and I'll then speak to recent regulatory developments and finish with comments on our outlook for 2013. After our prepared remarks, we will be happy to respond to your questions. Second quarter revenue of $756 million increased 18% over the second quarter of 2012, reflecting continued strong operating performance across the company. Operating expenses for the second quarter were $405 million, a 12% increase from the second quarter of 2012. Operating income for the second quarter was $351 million, a 26% increase from the prior year period. Adjusted operating income, defined as operating income less depreciation and amortization was $374 million, up 24% from the same period last year. Diluted earnings per share for the second quarter increased 32% from the prior year period to $1. Our full year 2013 non-GAAP EPS guidance range remains $3.49 to $3.59. We are pleased to announce that we've increased our annualized dividend to $1 per share. We also now anticipate total 2013 share repurchases of approximately $1 billion. Turning to year-to-date performance, revenue for the first 6 months of 2013 was $1.5 billion, a 16% increase from the first 6 months of 2012. Revenue at Moody's Investors Service was $1.1 billion for the first 6 months of 2013, an increase of 18% from a year ago. Moody's Analytics revenue of $429 million was 9% higher than the prior year period. Operating expenses for the first 6 months of 2013 were $857 million, up 16% from 2012. Operating income was $631 million, increased 15% from $548 million in 2012. Adjusted operating income was $678 million, a 14% increase from the prior year period. First half operating expenses, operating margin and adjusted operating margin all include our first quarter litigation settlement charge. Diluted earnings per share of $1.83 for the first 6 months of 2013, which included a $0.14 charge related to the settlement, increased 20% from the prior year period. Excluding the settlement, diluted earnings per share of $1.97 for the first 6 months of 2013 grew 30% year-over-year. I will now turn the call over to Linda to provide further commentary on our financial results and other updates.

Thanks, Ray. I'll begin with revenue at the company level. As Ray mentioned, Moody's total revenue for the quarter increased 18% to $756 million. Foreign currency translation for the quarter was negligible. U.S. second quarter revenue increased 18% to $408 million, while revenue outside the U.S. grew 18% to $348 million and represented 46% of Moody's total revenue for the quarter. Recurring revenue grew 7% to $362 million and represented 48% of total revenue, down from 53% from the prior year period. Looking now at each of our businesses, starting first with Moody's Investors Service. Total MIS revenue for the quarter was $537 million, up 22% from the prior year period. U.S. revenue for MIS increased 21% over the prior year period to $313 million. MIS revenue outside of the U.S., $224 million, increased 22% and represented 42% of total ratings revenue. The impact of foreign currency translation on MIS revenue was negligible. Moving now to the lines of business for MIS. First, global corporate finance revenue in the second quarter increased 37% from the year-ago period to $263 million. Revenue was up 28% year-over-year in the U.S. as a result of strong investment-grade and high-yield bond issuance, as well as bank loan issuance as corporations continue to take advantage of historically low interest rates. Non-U.S. revenue was up 52%, driven by European speculative grade bond issuers shifting their bank debt to the public bond market. Second, global structured finance revenue for the quarter was $97 million, up 7% from the prior year period. In the U.S., revenue increased 29% year-over-year due to strength in issuance of commercial mortgage-backed securities. Non-U.S. structured finance revenue was down 17% against the prior year period, primarily reflecting weaker issuance volumes in European residential mortgage-backed and asset-backed securities. Third, global financial institutions revenue of…

Okay. Thanks, Linda. I'll continue with an update on regulatory developments. First in the U.S. On May 14, the Securities and Exchange Commission hosted a full day roundtable on the various proposals made in its study relating to assigning credit ratings for structured finance products that are commonly referred to as the Franken Amendment study. The roundtable was comprised of 3 panels and panel participants were asked to discuss the advantages and disadvantages of various business models. Turning to Europe, CRA3 was adopted earlier in the spring of 2013 and went into force as of June 20. We have implemented the requisite policies and procedures accordingly. I'll conclude this morning's prepared comments by discussing our full year guidance for 2013. Moody's outlook for 2013 is based on assumptions about many macroeconomic and capital market factors, including interest rates, corporate profitability, business investment spending, merger and acquisition activity, consumer borrowing and securitization and the amount of debt issued. There's an important degree of uncertainty surrounding these assumptions, and if actual conditions differ, Moody's results for the year may differ materially from the current outlook. Our guidance assumes foreign currency translation at end of quarter exchange rates. As I mentioned, earlier, our full year 2013 non-GAAP EPS guidance range remains at $3.49 to $3.59. For Moody's overall, the company still expects full year 2013 revenue to grow in the high-single-digit percent range. Full year 2013 operating expenses are still projected to increase in the mid-single-digit percent range. Full year 2013 operating margin is still projected to be 41% to 42%, and adjusted operating margin for the year is still expected to be 44% to 45%. Guidance ranges for operating expenses, operating margin and adjusted operating margin all include the first quarter 2013 litigation settlement charge. The effective tax rate is still expected…

[Operator Instructions] We'll go first to Patrick O'Shaughnessy at Raymond James. Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division: So my first question -- can you talk just a little bit more, provide some commentary around your capital return plan? So increasing your share repurchase from $0.5 billion to $1 billion, bumping up your dividend return policy. Can you just talk about what some of the -- just thinking underlying those moves was?

Sure. I'll make some general comments and then see if Linda has anything she would like to add. It's -- it's really a recognition that we have an opportunity and sufficient financial flexibility to be able to return capital to shareholders on a more accelerated basis than we had anticipated earlier in the year. So this is -- we think, an opportunity for us to get cash back into the hands of shareholders, and we think that's our obligation, consistent with the need to maintain sufficient liquidity and financial flexibility for uncertainties in the future.

Yes, it's Linda. Ray is right. We have a cash-rich balance sheet, about $1.6 billion in cash on the balance sheet, and our net debt is effectively 0. We took a look at our dividend rate and with the recent increase in our stock price, the dividend yield had been about 1.3%. This brings it up to about 1.6%, and our payout to about 25%. So we feel that, that's appropriate recognition of the progress that we've made. And on share repurchase, because our investors seem to prefer both methods of returning capital to shareholders, we think that this is a prudent step for us to take and a good time for us to do it. Patrick J. O'Shaughnessy - Raymond James & Associates, Inc., Research Division: Right, that's very helpful color. And then a follow-up question for me. So certainly we saw corporate issuance dry up a little bit in June, and I think July has been pretty slow so far as well. Can you talk about what sort of issuance backlog that you've been seeing, and just how the different rate environment that we're facing today as oppose to, let's say, April and May, how that's impacting corporate issuers?

Sure. This is going to take a minute to go through, so let me talk to you about how we're going to do this. We're going to first discuss investment grade, then I'd like to talk a bit about high yield and then thirdly, leveraged loans. And for each of the categories, I'd like to talk about what we're seeing in deals last week and this week, the pipeline, the fund flow and then certain market observations. And as you acknowledged, we did see a bit of what we're calling the June swoon. But we would acknowledge that last week, the deal issuance rate looks a good deal better. Last week, we saw $16 billion in issuance, which was mostly driven by financials who have already reported second quarter earnings. And it's important to note, we try to make the same point every year. We're still in a corporate blackout period for many issuers, particularly the industrial issuers. This week, expectations are for another $15 billion of investment-grade issuance. We have $9 billion of issuance year-to-date -- I'm sorry, week-to-date. And I would note that there are 6 investment-grade deals in the market today with the 10-year at about 2.57%. On average, over the last 5 years, the 10-year has been about 2.73%. So you can take whatever you'd like from that, but we are below the 5-year average. The pipeline for several banks indicates that the forward calendar is building, and the pipeline was described by several of those banks as strong. Issuance is likely to be robust in the near term as issuers emerge from blackout periods and there is note that there may be a potentially busier August than is usually expected. Generally August is one of the slower months. However, banks are still forecasting a pullback…

And I would just add -- I would just add a very brief comment to the comprehensive review that Linda has just offered. As we saw rates moving out of Treasuries and spreads moving out in June, they certainly have come back in somewhat. Though they're not back to where they were in May, but Treasuries and rates have come back in and spreads have come back in. I think more than a question of the pipeline, it was a question of uncertainty about where rates would stabilize. And once that stability became more apparent, in part because of further comments from the Fed, I think there was more confidence in having those pipelines unlocked. And so what I think we're going to be looking at for the rest of this year is not a concern about bond issuance volumes with rates where they are currently are, but some level of market anxiety about the uncertainty of accommodative monetary policy, how long and how accommodative. And so in looking at our forecast, we assume there is going to continue to be some level of market anxiety around that. And probably, as we've seen frequently over the past few years, periods of good market activity and then periods of relative dormancy depending on, among other things, official comments.

And we'll go next to William Bird at Lazard.

Ray, I was wondering if you could just comment. I know there's been shorter duration issuance recently. How does that impact your business?

Well, it's good from the standpoint that there is more turnover of refinancing. The velocity of the refinancing increases with the shorter term securities. And interestingly, we had not seen a big jump in very long-dated issuance, even earlier when rates were at their lowest point, firms we're still -- I'd put it a little bit casually, but they were taking the free money rather than the cheap money. And so we have seen the term structure remain towards the short end. And that's, as I said, good from a refinancing perspective.

And Ray, bigger picture. Can you talk about just what your point of view is on whether the structural tailwinds in your business can overcome some of the macro choppiness to enable positive growth?

Yes. I think we -- I think we can continue to see growth. I think the business is well supported on the rating agency side from the disintermediation trends, certainly, that are going on in Europe, but also in Asia, Latin America and somewhat surprisingly at least to me, in the U.S., it continues apace. And the Moody's Analytics business is really not impacted by the interest rate cycle, the business cycle, the way the rating agency business is. So we expect we're going to be able to continue to get good growth out of MA.

And Ray, your second half outlook implies kind of a flattish growth profile at MIS. And Linda's comments sound like the pipeline is still pretty good. I guess are you assuming just kind of more of the same or just from a macro level, what's assumed in the second half in your outlook?

I think what we're recognizing and looking at some consensus opinions in the market from economists and other institutions, a greater than usual degree of uncertainty in terms of where rates might go, how spreads might react to changes in, again, quantitative easing or expectations for interest rate increases. If the market is concerned that accommodative monetary policy is going to be curtailed before we have self-sustaining momentum in terms of GDP growth, that's not going to be good for issuers. But if we do have a market view that we have achieved self-sustaining economic growth, I think we're going to see good levels of issuance even if we do have curtailment of quantitative easing because there's going to be borrowing for merger and acquisitions, and capital expenditure and share repurchase. As we've talked about in other calls, all these drivers, traditional drivers of issuance that had been relatively dormant in recent years.

And Bill, it's Linda. Following up on what Ray said, I think your observation is correct. The pipelines look pretty good, pretty strong. But again, we don't control when those pipelines move. And I think what Ray is trying to indicate to you is, we'll probably have some good weeks and we'll probably have some less good weeks, and that's what results from market choppiness. That's on the MIS side. I think we probably should make the observation that for MA, one part of that business, the enterprise of our software business traditionally sees much stronger revenue growth in the fourth quarter, and that seasonality is helpful to us. We are thinking about though the strong numbers that the rating agency put up in the back half of last year, and several of the analysts have observed that we do have tougher comps in the back half of the year, which is something that we're thinking about. On the other hand, we're going to be back to talk to you at Investor Day, which is 8 weeks from today. So we'll see where we get to, and we'll freshen up our observations at that time.

We'll go next to Manav Patnaik at Barclays.

The -- just firstly, on the guidance. I mean, clearly, the big high level sort of guidance ranges were unchanged, but at the same team, you doubled the expectation of share repurchases. So I just wanted to get a sense of what your thought process was in factoring in those increased share repurchases and why maybe the EPS range didn't narrow or increase? Is there something in terms of the number of shares you expect to issue that offset that impact? Just curious there.

Manav, I think we talked about why we left guidance where it is. On share repurchase, we've added expectation of approximately another $500 million. But that will be in the back half of the year. And looking at that, just looking at the weighted average counts and so on, we'll probably see that the biggest accretive effect of that when we get into 2014. So in other words, we're back-end loaded here. And we decided to leave guidance where it is. And again, we'll see how it works out. But your observation is correct. We will be taking out additional shares. We expect to. But again, that will be occurring in the back half of the year.

Okay. And just to focus on the comments you made on ERS. Can you maybe just give us a quick update on some of the key events or points that occurred this quarter? I mean, clearly, the 17% growth in all organic was pretty -- was pretty impressive.

Yes, let me ask Mark Almeida if he'd like to comment on that.

Yes, Manav, we did. We had a very good quarter in ERS. It was really -- and we've talked about this before. It's a function of timing. When we get the work done on our various projects that are in flight. We had a number of projects that completed during the second quarter. So we recognized a lot of revenue there. But the business is strong, driven by regulatory activity and regulatory requirements that are being placed on banks. We're seeing a lot of strength, particularly in the U.S. relating to the Dodd-Frank stress testing rules, as well as the Federal Reserve CCAR provisions. So we're seeing some very good strength in the business from both a sales standpoint. But as you observed, good project completion resulting in more revenue recognition in the quarter.

Got it. And one final one, just on the rating agency side. Linda, in the past, you've talked about some of the number of new issuers to the market, like the stats there. Can you maybe give us 1 or 2 line just on how those trends are tracking thus far?

Manav, I don't have those handy. Perhaps Ray, can give us a little bit more color. But they continue to be pretty good on what we've heard. We're looking to get more of that information together for Investor Day, but let me see if Ray has anything else to add.

No, I'm just going to add, and I will ask Michel Madelain if he would like to comment on this. But I think the new mandates have been continuing at a relatively steady pace. So no spikes in new mandates, but it also continues to be a good pipeline for us. And Michel, if you have something to add, please do.

No, I think what you said it's really -- we continue to see strength in Europe and emerging markets and the pipeline has been very strong, and so that trend has continued.

Yes, I think, Manav, again, one way to look at evidence of disintermediation is to look at that European CFG revenue growth number, and that would be one way to try to measure what's going on there.

And we'll go next to Peter Appert of Piper Jaffray.

The margin performance was very impressive this quarter in the context of the revenue stream. So I'm wondering, Linda, if this causes you to rethink the potential margin upside in the business over the next couple of years.

Peter, I'm going to ask Ray to comment some more after I do. But I think we're pretty happy with where we are on margin, and I think we're going to continue to stick to the story we have that over the longer term, we're kind of looking at low- to mid-40s, and we're happy with the progress that we've made. And I think we're pretty pleased with how the business has been performing on the margin line, as you noted. Ray?

Just 2 quick reminders. One is that the -- because of the over plan performance that we had last year, and as a result, the above plan incentive compensation we had last year, we did have an ability to expand margin this year more aggressively based on resetting of incentive compensation back to target. So we don't expect to see that kind of margin expansion going forward. And the other question will be the relative growth rates of MIS and Moody's Analytics because the Moody's Analytics business is a lower margin business. So we have to -- there is the uncertainty of the relative rates of growth of the 2 businesses in looking out over a number of years.

Fair enough. Ray, can you give us an update on how you're seeing the legal environment? Currently, you have -- there is a somewhat high-profile suit filed recently, any further settlements or dismissals that you can share with us?

No. There really hasn't been a lot of activity. We've had more than 50 cases filed, ratings-related cases filed since 2007, and a little more than 3 dozen of those have been resolved, most of them because they were dismissed or voluntarily withdrawn. We did have a couple of new complaints this year, and a couple of what are called summonses with notice, which are -- you should think of them as placeholders for possibly filing a complaint in the future. But those don't necessarily end up being actual cases. But that's been about it.

How about in terms of legal expenses? Would it be running at a relatively constant level at this point?

Peter, it's Linda. I'll talk a little bit about expenses as a whole, but we're not going to go into legal expenses per se. Probably worth noting that as Ray stated in the updated guidance, we're expecting expenses to be in the mid-single digits for growth rate for all of 2013. Second quarter, we popped up a little bit to a 12% growth rate. And that was about a $43 million increase. We expected that someone would ask for some color on that. So about 1/2 of that was compensation-related. The impact of hiring increases, annual compensation increases, some incentive compensation accruals. Another 25% of that was probably best viewed as professional service cost increases for IT and other things related to that. We did note that we're now in compliance on both CRA3 and Dodd-Frank, and we had spent some money to get that done. The other 25% is basically other stuff. So expenses as a whole, I think it's pretty moderate in that we're expecting low-single-digit growth rates over the rest of the year. And just to be sure, we're absolutely clear so that folks can see how to model this. Looking at the number that we have here for the second quarter, it's $405 million. We're still looking at about a $50-ish million ramp over the course of the year, approximately more or less. So if you want to think about how to model expenses as a whole, that might help you out a little bit.

And Linda, do you have the actual incentive comp accrual for the quarter?

Yes, I do. It was $34.3 million, Peter. And I think we have said -- we're hoping to have that be a little bit flatter this year. First quarter was $30.7 million, and this is just the incentive comp. This quarter, $34.3 million. I think we had guided folks to about $135 million for the rest of the year. With a strong health warning there that if we do better than we expect in the back half, of course, incentive compensation would increase commensurately.

And one last thing, just in terms of the structured finance market, strength in the U.S., weakness in Europe, any commentary in terms of just tone of market and expectations that things might get better going into '14?

Yes, with respect to Europe, I would characterize it as hopeful that things will get better in '14. And I think that, that securitization does have an important role to play potentially in Europe as they are looking towards an economic recovery and giving companies additional opportunities to access the capital markets, whether it's capital raising or liquidity purposes. I think the securitization can be part of a longer-term solution. But right now, there's -- there's just not a lot of demand, and there are alternative funding sources. As we've -- I think we mentioned in the previous quarter's call, for example, in the U.K., the Funding for Lending program that they have in place. So in the near term, there are alternatives to the securitization market. Longer term, I would expect this is going to be part of a solution to the sluggish growth rates. Whether that's in 2014 or not, I don't know.

And we'll move next to Alex Kramm with UBS.

I think at this point, just a few follow-ups. Just wanted to first come back to the whole higher rate interest rate question that obviously has been asked a lot here recently. But just hoping if you could give us a little bit more color in terms of, what is coming out when you talk to corporates and bankers? I know it's a difficult question to answer, but what should be the things that we should be looking for in terms of absolute level of rates or increases and pace of rate increases for people to really change their mind in terms of how they think about refinancing or just general issuance going forward. And then related to that, how are you -- yourself, thinking about it right now in terms of looking at the budget maybe for next year and going forward?

Sure, Alex. I'll take a shot at this, and then I'll ask Ray if he has anything further to add. None of us are fixed income capital market traders or desk participants. So I think the information that we gave earlier as to what we're hearing is probably the best indication. I think to sum it up, the pipelines look good. They look strong. And I think the 10-year, at approximately 2.56%, 2.58% today, because there will be 10-year sales later on this week, that's below the 5-year average of 2.73%. And we'll see how that plays out. I think that's probably about the best we can do in terms of where we think things are and what will be moving. High yield is, of course, very rate dependent. As issuance -- as all-in cost come in below 6%, we usually see the high-yield market run very strong, and we have seen some indications that, that may happen or it may not. Leveraged loans, as I had said earlier, are running very strong, both in terms of fund inflows and buyer attraction for that paper, which is floating rate. So with all of that, I think your guess is as good as ours, and I'll see if Ray wants to add anything else.

The only thing I would add is just to repeat the views of some economists, including our own. That for now, they really don't think the Fed wants the 10-year Treasury yield to be much above the 2.5% mark. And if that's correct, that is still an attractive environment for issuance by historical measures. Now obviously, if spreads widen out, that would be affected. But right now, they have been coming back in from where they went to in June. So reason for cautious optimism there on the rate side.

I appreciate it. It's a difficult question to ask. But then on the second part of the question, anything that you would say, how you would respond or when you would think you need to respond or is it too early to tell at this juncture?

If we're talking about a cyclical movement that has an impact on bond issuance, candidly, I don't think we would do a whole lot to respond. Our business, we have to monitor the debt that's outstanding. We would expect that the debt is -- that additional debt is going to be issued in the future. And so it's not a structural change in our business. It's a cyclical change, if it occurs. And as I said before, a rising rate environment that is accompanied by business confidence and economic activity is not worrisome. What is worrisome is sort of what we saw in June, where there was fear of rising rates and widening spreads because the rate environment was not -- or the anticipated rate environment was not aligned with a sense that we had self-sustaining economic recovery.

Alex, we'll also put in a plug on Monday at The Wall Street Journal with some information based on data of ours, in terms of broadening out of use of proceeds in terms of bond issuance. You may want to take a look at that. A little bit of a pickup in M&A. A little bit of pickup in capital expenditures. And those are one of the things -- those are some of the things that we're looking for. Also, as Ray has commented on before, the worst thing for us is a stagflation environment and inflation remains quite reasonably low at this point. So it all boils down to the question of when these pipelines move and encouraged by seeing 6 deals in the market today, 3 financials and 3 industrials. And we'll see what happens. But again, we have 2 parts to this business, and the Moody's Analytics business is performing pretty well.

Well, then, maybe as a segue, I'll just go into Moody's Analytics business, which is to say, I think somebody asked about it already. But just following-up on the ERS side, for one, you took the U.S. guidance up. And secondly, you noted that you obviously had a very good strong quarter. I think, Linda, last time I talked to you about this, you were actually noting that you're starting to engage in or at least try to engage with like higher deals, pitching higher -- larger deals. Anything to talk about, like where's that coming from or are you having success -- I mean, is there a big change in this business whether this could actually have accelerating growth from here?

Yes, it's Mark. I would say that we are having success there. We are -- certainly, in the U.S. as I said earlier, business is picking up largely in response to work that we're doing for banks related to the various stress testing requirements that are being imposed on them. That's been a very nice driver of growth in this market, and that's why you're seeing some healthier results here. In terms of the deal size, we -- the average size of deals probably remained about where it was. We do rather routinely win some very large scale transactions. But I don't know that at least thus far, it has not substantially moved the needle, if you look at the business overall. But certainly, I think the opportunity is there, again, related to the various regulatory requirements that are being imposed. That's presenting a lot of opportunity for us here in the U.S. as well as overseas. So I think that we're very optimistic about the business. We have -- we've been saying for some time that we think that this is a business that should grow at a low-double digit to mid-teens kind of rate over the long run. And certainly, what we're seeing in the environment, what we're hearing from customers, suggests to us that, that's going to be very achievable.

Great. And then just last one for me. Obviously, it seems like there's been a lot more discussion around restructuring the agencies, like Fannie and Freddie, in terms of bill proposals and things like that. So from what you've seen so far, any indication of how that would change the business for you? Are there other things that you would like to see? And maybe in general, how involved you are in those discussions in terms of lobbying and things like that. And any color would be great.

Well, obviously, we're aware of bills that have been introduced in Congress, including the Corker-Warner bill. I think it's still going to be a long process. It's not something that we are going to involve ourselves in from a lobbying perspective. Our job is to understand what the policy decisions are and to make whatever credit judgments that are appropriate based on those policy decisions, but not to push for one outcome or another. That being said, if there is a larger private label market for mortgage-backed securities, that's going to be beneficial. So we will watch that with interest, but without lobbying in any particular direction.

And Alex, it's Linda. There were 2 interesting things that came through the news overnight. And Ray may be able to speak to these with -- or Michel, with greater detail than I can. One was a proposal that perhaps they might be looking to be some relief on one of the 17g-5 related rules of holding 5% on balance sheet of structured deals. Secondly was an announcement that one -- one of the GSEs had done a securitization of its own -- part of its own balance sheet, and maybe Ray can talk a little or Michel can talk a little bit more about those. But we are seeing some news flow in those areas.

Yes, I don't have a lot actually to add to what Linda raised, other than that the observation that I think the experimentation, if you will, with some new securities and financial innovation is probably a positive. We've been through a period where there hasn't been a lot of financial innovation, and testing with some of these new securities types is -- I think is supportive of longer-term growth in some key markets like housing. So that's -- that's really all I -- I'm -- other than what I've seen in the papers, I don't have any additional insight I can offer on those.

We'll move next to Craig Huber at Huber Research Partners.

Linda, can you hear me?

Yes, we can.

Yes we can, Craig.

Can you break down for us on a percent basis or in dollars your 4 main categories within ratings, break out high yield versus bank loans, investment grade, et cetera, and do it for all 4 areas, please? That's my first question.

Sure, Craig. CFJ -- CFG, excuse me, and we're comparing second quarter 2013 over second quarter 2012, investment grade up nicely. Last year, about $42 million, this year about $60 million. That's up -- it's up 43%. It represents 23% of the total CFG revenues, which is about $263 million. Spec grade up to $57 million, which is 22% of the CFG total. And that's up 80% over last year's 2012. Again, if one is looking for indication of where -- what does disintermediation look like, that's it. Bank loans up to $53 million, 20% of total CFG. And there, we're up 51% over last year. Other is 35% of CFG. It's about $93 million. Going on to look at some of the other areas, structured, Craig, total of $97 million of revenue for second quarter. First-line is ABS, about $25.5 million. That's about 26% of the total. Now that is actually down from last year's $29.1 million. RMBS, $18.7 million, also down a little bit from last year. Commercial real estate, $30.7 million, a big increase from last year's $18.2 million. And derivatives at $22.3 million, about flat to last year's $21.5 million. That makes up 23% of the total SFG line of $97.2 million. Going on to third category FIG, total of $84.5 million. Banking is $57.5 million. It's 68% of the total, the lion's share. Insurance, $23.3 million. It's 28%, and managed investments of $3.6 million is 4% of the FIG line. Lastly, public project and infrastructure. PFG and sovereigns, $43.6 million, about flat from last year and 47% of the revenue line there. Munis at 43-point -- excuse me, $4.3 million, again, $4.3 million, about 5% of the total for PPIF. And project and infrastructure at $44.8 million, up nicely, 39% from last year. And that makes up 48% or about 1/2 of total PPIF. Do you want to do MA as well, Craig?

I think we all have that.

Okay. Good. All right.

I'm okay there. My next question, if I could, please. Can you -- as you think back over the last year, Ray or Linda, within your corporate finance segment, how much of your revenues there on the transaction side have been derived from refinancings versus growth capital? And how do those percentages vary versus, say, the prior 10 years on average?

I'm going to have to give you some approximate numbers, but a little more than 1/2 of the activity, I think, this year has been refinancing with M&A and share repurchase ticking up a little bit. Really not on the CapEx side though. So it's still dominated in terms of refinancing. But we are seeing borrowing for other purposes that is a bit stronger than what we've seen the last couple of years.

Okay. So it's not significantly higher than, say, 50% coming from refinancing to the best of your estimate?

No. I think that's correct. It's above 50%, but I don't think it's significantly above at this point.

Okay. And then if we could just switch to legal costs. What is your best sense of when you think your legal costs on a year-over-year basis will start dropping?

Craig, it's Linda. We're still not going to talk about legal costs. But we did talk openly about our expense outlook so.

Craig, the only thing I can really tell you is, there is a lot of uncertainty around this because we, obviously, are working to have cases dismissed as early as possible. Sometimes, we succeed. Sometimes, they move on to the discovery process, which becomes more expensive. So it really depends on what our success rate looks like with early dismissals and -- I just -- I can't give you a good forecast on that.

Another question, please. As you look out over, say, the next 3 years, let's say, here in U.S. investment grade, bank loans and high yield, can you just talk about how much has to actually get refinanced and that's still outstanding and how that maybe looks versus where we're at today for this calendar year?

Well, for 2014 and 2015, a lot of what would have matured has been refinanced. And that's why we talk about these other drivers being important to the corporate finance growth story here in the U.S. going forward. It's a different situation as we look at corporates elsewhere around the world. But the U.S. market is an important market for us. So it is worth focusing on. That being said, there remains a lot of refinancing that has to occur in 2016, 2017. Some comments that we made earlier in the call about the fact that borrowing over the last few years has been a relatively short-term nature, and that borrowing is going to come around for refinancing again. So -- and the investment-grade market tends to refinance at a much steadier rate than the high-yield market. So that's -- we would expect to see refinancing over the next couple of years coming out of investment-grade market in similar ways to what we've seen in previous years.

And Craig, you can take a look for those wall of refinancing charts in our updated analyst presentation. And we'll show that again, take another look at that, again, when we do Investor Day in 2 months.

One final question, if I could. Your guidance for your 4 broad areas within your ratings business, as those guidance numbers, the infrastructure finance, corporate finance, et cetera, what are you most concerned about for the back half of the year? I mean, what -- in terms of, which ones you think have more potential upside than the others? And vice versa, where you're most concerned about on your guidance?

I'm not concerned about any particular business line. I'm really more focused, as I think probably everybody is at this point, on the macroeconomic situation. Whether -- how the market will respond to curtailment of quantitative easing if and when it begins. Predictions that it might happen in September. Predictions that it might happen at the end of the year, and market reaction to that. And I think there is going to be appropriately a lot of attention coming from policymakers to make sure that the market reaction is not unfavorable, and that we don't have a tightening of financial conditions in a way that would turn our recovery back in the wrong direction. So it's not individual business lines. It's more the macro situation at this point, Craig.

We'll go next to Doug Arthur at Evercore.

Ray, just one question. I was -- the corporate finance internationally accelerated in the quarter. I think it was up sort of 30-ish in Q1 and up 52% in Q2. And you talked about disintermediation or Linda did. How does the comp look going forward there? And you think that disintermediation in the bond market in Europe is really accelerating at this point?

I think it's going to continue. We're going to continue to see new mandates. I don't anticipate it accelerating. It's been steady, and it's been strong. And that's, obviously, good news from a bond market volume perspective. Many of the credits are in the high-yield sector. I expect that, that will continue since the investment-grade credits had largely been in the bond market for a number of years already. And for some different reasons, I would expect to see a similar result as we look at the emerging market economies in Asia, Latin America, for example, where growth is outstripping banking system capacity. And -- and that's leading to disintermediation as well. I don't know, Linda or Michel, if you have anything else you'd like to add to that?

I mean, the only thing is that one of the underlying factor in Europe is clearly the condition of the banking system and their inability to basically meet the demands of a number of those issuers. And that's actually true for the high-yield market, basically. So there is an element of -- there's a cyclical element as well as a structural element at play here.

And Doug, pretty frequent stories in the press that particularly in the periphery, lesser credits have a difficult time with bank financing and are looking to go to the spec grade market. So to follow-up on what Michel and Ray have said, we think that trend will continue.

We'll move next to Edward Atorino of Benchmark.

Just about everything in the world has been asked. You've got a lot of shares you could buy, take out I think 14 million to 15 million shares. I mean, are you going to have offsetting issuance or is that really a potential over the next couple of years?

Ed, it's Linda. We tend to have issuance more focused in the front half of the year, and we try to keep our equity utilization below 2% for the employees here. So we're looking, as we said, to overall have a reduction in the outstanding shares. And thus far, we've been able to do that. And I'll ask Ray if he wants to comment any further on that.

No, just -- just I think Linda's comments stand on their own. The original guidance that we had given for approximately $500 million in share repurchase was largely to offset issuance. But that would not be the case with the -- with additional repurchases.

I mean, can you conceivably buy 14 million shares of stock?

Well, conceivably, yes.

Okay.

We'll have to see where the price...

I don't want to be a wise guy and say, when?

No, we're not going to say that.

I got it. Okay.

We're working on it, Ed.

And that does conclude today's question-and-answer session. At this time, I would like to turn the conference back over to Mr. McDaniel for any closing remarks.

Thank you. Just before we end the call, I do want to make sure everyone knows that Moody's will host its Investor Day on Tuesday, September 24, here in New York. Attendance is by invitation only and the event will be webcast. And further details will be provided on our Investor Relations website at ir.moodys.com. So thank you, all, for joining the call today, and we look forward to speaking with you again in September and October.

And this concludes Moody's second quarter earnings call. As a reminder, a replay of this call will be available after 4 p.m. Eastern time on Moody's website. Thank you.