McGraw Hill's Management Presents at Barclay's Americas Select Franchise Conference (Transcript)

| About: S&P Global (SPGI)

McGraw-Hill Companies Inc. (MHFI) Barclay's Americas Select Franchise Conference May 22, 2013 10:00 AM ET


John F. Callahan - Chief Financial Officer and Executive Vice President


Manav Patnaik - Barclays Capital, Research Division

Manav Patnaik - Barclays Capital, Research Division

All right. Good afternoon, everybody. Thank you for being here. I guess it's the last one in this room, so we have the homestretch. I'm Manav Patnaik again, Barclays' information services analyst. I cover McGraw Hill Financial, I guess, ticker MHFI now. I'd like to thank Jack and Chip as well, he's back there, for coming to the conference.

As a brief introduction, Jack Callahan is the EVP and CFO of McGraw Hill Financial. He joined in December 2010. He has a solid background in financials ranging from Dean Foods to PepsiCo to GE, McKinsey. He's got a pretty solid background there. And also, for those of you who don't know Chip Merritt, who's sitting way at the back there, he's the Head of Investor Relations, and he recently joined as well. But he's been very helpful in the outreach.

So with that, I'll just let Jack run through his presentation and then we'll have some time for Q&A later.

John F. Callahan

Thank you, Manav. Good afternoon. It's a pleasure to be with you today and have the chance to talk about McGraw Hill Financial. And as Manav mentioned, if you don't know Chip, please use this as an opportunity to get to know him.

Before I get going, I do want to remind you that as we go through this, there are some historical information that we have adjusted. What we've done is we had significant onetime costs as it related to the separation of McGraw-Hill Education from McGraw Hill Financial. So they've been excluded from these numbers, and they're very well detailed in all our filings. And as always, I do need to remind you that I'm likely to have 1 or 2 forward-looking statements, and I do caution you on that.

Today, I was reflecting on getting ready for this, and it was -- today is a little bit of a landmark event in going to speak to investors, at least at a conference like this. This is the first time we're actually going as McGraw Hill Financial. Shareholders approved the change in name just 3 weeks ago at our annual meeting. But I hope, as I go through this, you realize that more is changing than just -- we divested Education, and we have a name change. There's a lot underway. I think we're already starting to see some benefits of a more focused, more streamlined portfolio, I think benefits we'll see further in the future. We believe there's a number of great trends out there that are going to continue to propel our future growth.

And I do want to address the fact that we are addressing a fair amount of cash and give you some sense of how we're thinking about what we're doing to both grow the business and, at the same time, return some to shareholders. And as I go through this, give you a brief overview of the great portfolio that we've had.

In the last few years, there have been a lot of work. And Manav mentioned I joined in late 2010. It's been a busy time. We've worked a lot to sort of realign our portfolio. So in 2011, we sold our Broadcasting business to Scripps, a much better strategic owner for the business. And more recently, we completed the sale of McGraw-Hill Education to private equity earlier this year.

The asset sales certainly have strengthened our balance sheet, have supported a step-up in cash that we've returned to shareholders. But most importantly, the McGraw Hill Financial portfolio is now focused and well positioned to sustain growth. Our strong start in 2013 is consistent with these recent trends and gives us great confidence on our full year guidance of high-single-digit growth. And I would just comment on this case that the numbers here underneath -- of McGraw Hill Financial are restated just to exclude the impact of Education.

Now that separation is complete, we are now intent on delivering on the promise of McGraw Hill Financial based on our vision of building the leading brands and ratings, benchmarks and analytics. We are introducing a common brand architecture that links together our portfolio of compelling brands. And last week, we had an opportunity to visit the New York Stock Exchange to mark the transition to a new stock ticker, MHFI. Our previous ticker was MHP, McGraw-Hill Publishing. Publishing is certainly part of the rich heritage of this company, 125 years old, but it's not part of our future.

We have a broad portfolio of terrific businesses. Clearly, S&P is the anchor, but we are much more than just a ratings business. S&P Dow Jones Indices, S&P Capital IQ and our Commodities & Commercial businesses are all valuable franchises with great growth potential. And increasingly, we are leveraging synergies across these businesses in areas such as data management, technology, talent management and administrative functions.

Perhaps one of the greatest synergies across the business is the ongoing build out of our global network. Today, about 40% of McGraw Hill Financial is outside of North America, and it is our intent to accelerate that growth. To that end, last year, every single one of the acquisitions we completed last year was outside of the United States. All of our businesses tend to be colocated in common locations around the globe. As we build out this global network of offices, the businesses are increasingly leveraging each other to understand specific market needs, enhance local reputations and work with leading customers.

And now, as we extend our global reach, there are multiple secular trends that we believe will sustain our growth well into the future. Let me give you just a few examples. In Ratings, we believe we're very well positioned given the amount of debt that has to be refinanced in the coming years at a time when the constraints on the banks' balance sheets are going up. Platts is benefiting as commodities shift ever increasingly towards an investable asset class. And given volatility, customers are increasingly shifting to longer-term contracts to daily -- to mechanisms based on daily price assessments, another way to kind of manage their longer-term volatility and commodity costs. Indices benefits from passive investing aided by the growth of exchange-traded funds; and S&P Cap IQ provides data and analytical insights to ever more sophisticated investors.

But we're not only focused on growth. We have made productivity a company-wide initiative. In the fall of 2011, we announced -- as part of the announcement to separate McGraw-Hill Education and McGraw Hill Financial, we targeted at least $100 million in cost reductions, and we've exceeded that goal. McGraw Hill Financial's share of these cost reductions contributed to the ongoing margin enhancement that we saw last year and continues into this year. And going forward, we intend to continue this focus on costs and relentlessly look for cost synergies around the globe.

Strong top line growth combined with margin enhancement has delivered strong earnings per share growth, which we expect to continue into this year. On a restated basis, which only includes McGraw Hill Financial, earnings per share grew 20% on a compounded basis between 2010 to 2012. The midpoint of our 2013 guidance implies mid-teens growth. We also generate strong cash flows. The onetime cash cost of separation has impacted free cash flow a bit last year and into this year. But going forward, we anticipate annual free cash flows approaching $1 billion.

With this level of cash generation, one of the most frequently asked questions by investors, "What are you going to do with it?" Our first priority for cash after repayment -- after the payment of our regular dividend, is selectively adding to our great portfolio of brands. Over the last 2 years, we have invested close to $400 million in tuck-in acquisitions that added capability across the portfolio. In addition, last year, we also formed an exciting joint venture with CME, combining the S&P and Dow Jones Indices, and I'll speak a bit more about a little just a bit. We continue to look for opportunities to build out the portfolio like we have.

We also have a clear commitment to returning capital. This company has a commitment to its regular dividend. We have increased it every year for the last 40 years. More recently, we have stepped up cash returned to shareholders, with close to $3.6 billion returned to shareholders since the start of 2011 to now. So far, just in 2013, we have increased our regular dividend by approximately 10% and entered into an accelerated share repurchase program for $500 million. Going forward, we will pace the return capital to shareholders with compelling acquisitions.

Now let me turn to provide you a bit more of an update on the performance of the businesses that constitute the portfolio. Let me start by recapping Q1 consolidated results. We're off to a good start. The first year is off to a really wonderful top line result, with the top line growing 14%. This strong top line performance combined with the cost initiatives that we've put in place, have allowed us to expand margins maybe even a little ahead of our expectations, of up close to 4 points in Q1. Taken in total, earnings per share were $0.80 in Q1, up 29%.

Let me talk about the major driver of these results in Q1, and that's the Ratings business. Ratings generates 45% of the revenue of McGraw Hill Financial and over half the profits. Furthermore, it also provides high value-added ratings information that is further monetized by our S&P Capital IQ business. As I mentioned earlier, we are very well positioned to continue to grow this business given the secular trends in capital markets around the globe. There's a lot of debt that has to be refinanced. The deleveraging of the banks continues. There's the development of more sophisticated public debt markets.

As the anchor of the McGraw Hill Financial portfolio, the results of S&P Ratings have been compelling. Revenues ended 2012 over $2 billion, and the first quarter of 2013 was very strong with 20% growth, largely due to strong corporate and high-yield issuance and a steady recovery in structured finance. Currently, the market does remain robust. But as a reminder, the back half of the year overlaps do become more challenging than what we see in the first part of the year.

Margins recovered in 2012 versus 2011 as top line leverage stepped up and the growth rate in compliance costs moderated. And we're very pleased with the solid margin improvement in the first quarter of 2013. All in all, a great start to the year.

One issue I do want to briefly comment on is the ongoing litigation with regards to the Ratings business. While many legal issues facing this business have been addressed, we continue to aggressively manage the United States Department of Justice complaint. The government reply to our request to dismiss was filed earlier this week, and we look forward to having the opportunity to present our position to the court in July. Today, I just want to reiterate that we will vigorously defend the company against such meritless litigation, and I would refer you to our website dedicated to this issue for more detail and ongoing updates.

With regards to other legal issues, we continue to work to remove most existing U.S. state actions to federal court in an effort to consolidate the proceedings, and we continue to address the remaining issues with 32 cases now dismissed outright. And across all the remaining cases, there are no trial dates set. Overall, we will continue to diligently address these litigation issues. In the meantime, as we just reviewed, the Ratings business is doing just fine.

Let me turn now to S&P Dow Jones Indices. As a reminder, this is a joint venture that was formed in the middle of last year with CME, creating the world's leading provider of index-related benchmarks. McGraw Hill Financial has a 73% ownership. The integration of the 2 businesses is now largely complete, delivering some cost synergies but, more importantly, combining 2 great franchises to drive future innovation.

One example of ongoing innovation is the S&P Low Volatility Index that was launched just 2 years ago and already has over $5 billion under management. The addition of Dow Jones has added considerable scale to this business, while the base S&P business continues to deliver solid growth. In the first quarter of 2013, the base S&P business grew 9%. Reported growth with the addition of the Dow Jones business was 45%. Margins, admittedly quite attractive, are benefiting from cost synergies of the combination, but the key will be the ongoing innovation to drive future growth.

And as I mentioned earlier, one great place to innovate is in creating new exchange-traded funds. The growth in EFT assets under management the last 5 years is exciting, and that trend continued into the first quarter, with S&P and Dow Jones-related EFT assets under management now well over $500 billion. This is a great business, and we're all excited about the future prospects of this combination in 2013, its first full year of operation.

Now let's turn to S&P Capital IQ, a leading provider of high value-added data and analytical tools. This is a broad portfolio unto itself. The integrated desktop platform was initially based on the legacy Capital IQ platform, which provides rich company-specific data and analytics. And now we are investing to build new capability. Enterprise Solutions provides important real-time data feeds. S&P Capital IQ, as I mentioned earlier, is the commercial arm for the Ratings business, providing ratings-related information in both the desktop and direct feed. And there's also a modestly sized research arm in this business.

In aggregate, this business has delivered double-digit growth over the last few years, with margins around 20%. In 2013, we currently expect mid-single-digit growth given the challenging conditions across the financial industry. But we are investing for the future, building a stronger portfolio of analytical tools and extending our real-time market information offering, in part leveraging the acquisitions made last year in R2 and QuantHouse. Profits in the first quarter of 2013 were a bit below a year ago, but we do expect to return to profit growth in the second half of the year.

Finally, let me review Platts and our commercial businesses. Platts provides commodity-related industry insights and price assessments. The historical base for this business is oil and petrochemicals, which continues to grow quite nicely. But we also are making investments and targeted acquisitions in iron ore and steel, natural gas and sugar to deepen our coverage and enhance our longer-term growth opportunities. The commercial businesses are headlined by J.D. Power, another great brand. J.D. Power last year had its best year ever as the business is benefiting from the global recovery in the automobile industry. Today, about 30% of J.D. Power's revenue is sourced across the Asia Pacific region, with growth -- led by strong growth in China, the world's largest automobile market.

Over the past few years, Platts has been the primary growth driver, aided in part with acquisitions like BENTEK, Steel Business Briefing and Kingsman. The business is off to a good start in 2013 with 10% growth in the first quarter. Growth in the commercial businesses has been relatively modest as strength in J.D. Power has been offset by a decline in our construction information business. However, the prospects for construction are improving as overall market conditions are stabilizing. The commercial business in total were off to a slow start in 2013, but we do anticipate improvement over the balance of the year. Margins have taken a big step up in this business. It's been driven by the sustained growth in Platts, which is a relatively higher-margin business, and some specific cost initiatives have -- and together raised margins to 27% last year. First quarter margins in 2013 were very much in line with that at 26%.

So that was a quick review of the businesses. It's a great portfolio. Individually, they're exciting businesses in their own right. And collectively, it gives us a wonderful platform for global growth. I'd also want to add that we have a great balance sheet, which has been further strengthened this year with the sale of the Education business. We have paid down 1/3 of our debt. And going forward, we have limited CapEx and working capital requirements. We'll generate these strong cash flows, and we'll use that to both build on the portfolio with targeted acquisitions and selectively continuing returning cash to shareholders.

So in closing, it's been a pleasure, I guess, to represent this new company, McGraw Hill Financial. We're 125 years old, but there's a lot that has changed. There's a lot that will continue to change. And I think you should sort of view where we are today as McGraw Hill Financial as the early pages of the next chapter of where the company is going. We have demonstrated that we know how to grow businesses. Most of our businesses started organically. And we expect 2013 is going to be another good year. It's certainly off to a strong start.

So with that, thank you for joining, and I open it up for questions.

Question-and-Answer Session

Manav Patnaik - Barclays Capital, Research Division

Thank you, Jack. Keeley [ph], that was 4 companies in 20 minutes, so good job there. I'm sure there's many, many questions. Let me just start off by the 2 that are in the spotlight nowadays. The first one, you mentioned briefly the DOJ case. I guess the DOJ filed their response to your response yesterday. Can you maybe give us just a quick snapshot of what was in that response? And then procedurally, I guess you guys have to respond? And then when -- what the arguments are?

John F. Callahan

Yes. Well, I mean, I'm not the legal expert on the government's response. Let me say this. In terms of what the government responded with, just like I think in the initial complaint, there were no surprises. So I think all is [ph] generally anticipated. From here now, we have an opportunity to file our response to their response. That will happen in early June. I believe it's by June 3. And then in early July, I believe it's July 8, we have the opportunity to argue. Both sides have the opportunity to argue the merits of the case on July 8. But I wouldn't point to July 8 as any magical date. Most likely, the judges listens. Because often -- and starts to form a point of view. So going back to the overall position of this, this is obviously an issue we take very, very seriously, and we'll be very, very aggressive in protecting our position. But from an investor point of view, we've been candid. I think this is going to be with us for a while in terms of -- as we kind of work through this stage by stage.

Manav Patnaik - Barclays Capital, Research Division

Okay. And I'm sure there'll be more follow-ups there. But if you can maybe briefly just touch -- I've been in Europe for the last week now, and you can't turn around the globe without hearing about the EC investigation into Platts. I guess you're involved, but mainly into your customers providing. Can you maybe just help clear up like what's going on there? Is it impacting Platts' business? And what I guess your leaders there are talking about?

John F. Callahan

Yes. Well, first, let me start. There's been no impact on the business, for example, the daily functioning of the market on close process that's really important in the price assessment. That delivery in the oil market has not been impacted in any way, shape or form. So that's the functioning, fine. We are cooperating with the investigation. It's still, I'll be honest, not necessarily clear what everyone is looking for at this point in time. So I'd -- and we're just going to kind of continue to cooperate. But not necessarily clear at this point in time what the real focus is for us right now.

Manav Patnaik - Barclays Capital, Research Division

Okay. Anybody...

Unknown Analyst

I have a big question.

Manav Patnaik - Barclays Capital, Research Division

Okay. All right. Well, I guess one right there.

Unknown Analyst

Yes. Just coming maybe to your margins, especially Ratings side, we hear from your peers that clearly, the business, because of the changes that have happened on the regulatory front and the compliance front, operating a ratings business now is much more labor-intensive on the compliance and regulatory front than it was. Does that mean -- obviously, you've shown great margin improvement in the last couple of quarters. On an adjusted basis, you were up 46%. Do you think that upward trajectory will remain in place? Or is it not fair to look at what you were achieving pre-crisis? Do you think -- as you continue to grow, will the -- basically, the economies of scale, which are inherent in the business, will they offset the higher fixed costs you now have on the regulatory compliance? That's basically what I'm trying to get at.

John F. Callahan

Yes. I have -- right now, we're still in the medium term. I wouldn't suggest margins are going to revert to pre-crisis sort of levels right now. That all being said, you have seen -- I think we'll continue to see some steady improvements in our margins. We are very pleased with the Q1 results. I'm not sure I'd continue to step up from Q1. I mean, I think Q1 could end up perhaps being one of the high water points of this year, but I think that will set up a margin improvement for the full year, and I think we can continue to grow off that moving forward. In terms of the compliance cost build out, a lot of that is behind us, where we are putting incremental compliance costs in the fairly targeted and manageable in the overall -- of the overall P&L. There's -- we already have a fair amount of legal expense built into the P&L. We haven't seen any big increase in that at this point in time. The one thing I would just caution you on -- and probably this is a topic that we'll come back to in future investor presentations -- there are some differences if you're trying to compare our margins to some other rating agencies. For instance, we have a business called CRISIL. That's about 10% of that business. If you want information on it, it's a publicly traded company in India. And that -- the fact that we have that business alone is probably worth over a point of margin delta between the 2 businesses. So there also are some differences also that we need to perhaps let everyone understand a bit better.

Unknown Analyst

Actually, on that note, do you mind commenting on CRISIL maybe, and some more details? How do you see the future there?

John F. Callahan

Well, it's been one of the best investments the company has ever made. So we have a wonderful relationship. We have 53% ownership. It's a great business. It's probably not growing as robustly this year as it has in the past, in part driven by some of the challenges, and more locally in the India economy. But its had some nice growth, and about half of their business is actually sourced outside of India as they provide a lot of services to global banks, their acquisition of Coalition last year. So in many ways, it's a little bit of a portfolio unto itself but a very interesting business and provides a lot of analytical support and leverage to our Ratings business around the world.

Unknown Analyst

And maybe lastly, if you don't mind, to the extent you can, could you comment on the Franken Amendment roundtable discussions from last week? And...

John F. Callahan

I was glad we had the opportunity to participate. And I think, led by Doug Peterson, I think -- I hope everyone had the view that we're very open-minded in trying to look for pragmatic solutions where there may be an issue. I think the one point that I think started to happen, I hope it continues, is there seems to be a lot of dialogues between rating agencies and governments, and it'd be nice if the investors would listen, too. Because at the end of the day, investors have a role in this, too; what information they need to rely on. Sometimes, I'm not quite sure that it's given the same focus that some of the other -- we'll see.

Manav Patnaik - Barclays Capital, Research Division

Okay. You talked about, in your presentation, that there's a lot of work left to be done. You're early stages in MHFI. Can you help maybe just elaborate, in terms of near term, medium term, long term, what that work entails? Like is the near term more around just sort of putting all these assets together, working with each other? And also, getting to the obvious question everyone tends to ask long term, is there more rationalizing of the portfolio coming? Like was Education the end of it there? More coming? And if not, is there more sort of -- outside of tuck-ins, anything more sizeable that you would want to fill in?

John F. Callahan

Well, I think you're -- the way I think about it -- short term, medium term, long term is the way I'm thinking about it, maybe to take a step back on the short term. We moved real fast the last 18 months to separate these businesses. We've outsourced a lot of activities across finance, IT, HR. Some of those activities are still underway. For example, our rollout of a new payroll -- global payroll provider is still, while approaching completion, is not done. So I would say, Phase 1 is we just have to complete all the initiatives we started to put in place last year. And so -- and then the organization then needs a bit of time to streamline existing processes and dealing with a new way of doing business. So we changed a lot last year, and I think 2013 is a year bit of stabilization and realization and simplification for us. As we start to get deeper into McGraw Hill Financial, and we already have started working as we have formed a couple integrating mechanisms, we are looking at common issues across the corporation. One will be technology and data, another one is compliance and government affairs, another one is customer market development. And we're starting to leverage these integrating mechanism, these committees to develop a company-wide view on how we manage and deal with the issues, the opportunities across the portfolio. And I think as we push forward on these mechanisms, that will then form further iteration of those sort of functional areas to kind of give us more precise and targeted support of the businesses long term and a bit more of an integrated manner versus where we've been in the past. But there's more to come on that. We're still -- I would say, we're 9 months into doing work in that area. And then lastly, as it relates to the portfolio, look, I think a lot of the heavy lifting on the portfolio is done. There's always going to be some fine tuning. There's some small little businesses in the portfolio we're looking at currently. So there's always going to be some fine tuning. I'd say, for right now, what we need to do is just kind of stabilize the business. We've been through a lot of change. And I do think, as we start to realize more of the potential of McGraw Hill Financial, I think that creates an opportunity for us to think about some other corporate development actions. But I think that's further down the line.

Unknown Analyst

You've mentioned that you've got sort of 4 businesses growing [indiscernible] sales basis at about 10%, it looks like at the moment, but also different profit margins. I'm just trying to understand what your mix shift is over time at the margin level and whether you've got any discretion on how you control that.

John F. Callahan

The second part, I have to think about. But I don't think there's any -- what's nice is some of our faster-growing businesses are some of our highest-margin businesses. So Ratings, Platts, the Indices businesses, those are our highest-margin businesses. They currently have the highest growth rates. So therefore, as it relates to S&P Capital IQ, our commercial businesses, as we work forward on those, it's important for us that not only do we work the top line, we're also trying to work the costs side. We've had some good success on the commercial businesses doing that, and I think you'll see some benefits of that as we get into 2014 as it relates to S&P Capital IQ. So I think, if anything, if there is a mix shift in the margin composition of the company right now, say, at least over the medium term, it feels positive, not negative.

Unknown Analyst

[indiscernible] prioritize the growth of the indices or ratings at the expense of Capital IQ, particularly given it's the best market for them at the moment?

John F. Callahan

But we're not really constrained. Why not do both? Right? I mean, we're not -- our capital -- our internal capital investment requirements are actually quite modest. This year, we could spend around $125 million in reinvestment in the business. So it's really -- we're not constrained. So as long as we can grow the business, each project, that we're getting an adequate return for shareholders, we're not going to -- we don't feel we're in the position to starve one business at the expense of others right now.

Manav Patnaik - Barclays Capital, Research Division

I feel like this is somewhat a back question but one I have to ask in the sense that you obviously paid a $700 million special dividend in December, you upped your regular dividend by 10% and you've done a $500 million ASR, but you're still sitting on $2 billion of cash and only $800 million of debt. So I guess what are the plans on -- clearly, I think you can be more aggressive, but how do you guys internally think about use of that cash? Prioritization? Should we expect more share buybacks to begin happening, et cetera?

John F. Callahan

Let me step back first. We've done a lot the last few months. So I mean, the special dividend was announced in December, and we just did the ASR. So that's $1.2 billion. So we haven't been sitting on it. So we have taken some actions. And in many ways, if you were to add together the special dividend combined with the share repurchase, in many ways, that represents a fair amount of the domestic net cash proceeds form the Education sale. That all being said, look, we recognize. Not only do we have a lot of cash, we generate a lot of cash. And going forward, we really kind of see it as a balance between -- if we have a smart acquisition that we think is going to build capability in one of these businesses, we're gonna chase it. We feel we've had reasonable success the last few years. But at the same time, if -- we also expect to deliver some share -- deliver -- buying back some shares. So we'll see what happens in the back half of 2013. We haven't made any firm decisions on that one way or the other. Totally understand that's a question that's high in your minds, and will certainly back to address that as we go through the year. The one caution I would just -- a reminder I'd put to everyone is while I do have around $1.9 billion -- honestly, maybe $2 billion sort of cash on the balance sheet, about half of that is offshore. So -- and for share repurchase, for dividend payments, for tax payments, I need domestic cash. So I think there is a little bit of balancing act on that. I don't see us, though, over the near term at least, doing anything -- any radical financial-only restructuring of levering up a significant amount to buyback more shares. I don't feel the need to even consider that right now just given how -- where we are right now in our cash position. Somewhere down the line, that's a conversation for a different day.

Manav Patnaik - Barclays Capital, Research Division

One more.

Unknown Analyst

If I can just -- a quick follow-up on the structured credit side in Europe in particular. It's obviously been extremely weak. Do you see any tentative signs of that turning around? And if not, do you expect to see them in the coming quarters? And just on that note as well, with CRA 3 likely to be implemented some time in the second half of the year -- I mean, do you -- as far as I understand, the mandated rotation of issuers on the structured product side, do you see that market as just less attractive then as a result? Or do you think it's -- when it does come back, even with the mandated rotation, it'll be fine and it would essentially be musical chairs between yourselves, Moody's and Fitch largely? And...

John F. Callahan

[indiscernible] that second issue first. I mean, my understanding of the regulation is it's not mandatory rotation across all elements of structured finance. It's not even RMBS or CMBS. It's only when you put a security that sits on top of it that's collateralized by those assets. So the asset class that you're talking about is fairly narrow. So you have a small piece of a business that isn't that big right now. So will it have some impact? Yes. Is it -- how much of an impact it really has on the overall business? It's not clear right now. But it feels -- at least it's been fairly focused where that impact is, and we'll work our way through that. Back to your broader question about structured financing in Europe, it -- broadly stated, it feels like, and if I would include the broader view of Europe including corporates, it feels like Europe is a bit better than maybe it was. But it's still -- the pace of activity is certainly not what we've seen either in Asia or in the United States. So it's steady. You'd like to believe you're seeing early signs, but I wouldn't be too aggressive at this point in time.

Manav Patnaik - Barclays Capital, Research Division

All right. So we'll be outside if anything. And thank you, Jack, again. And thank you, everyone, for being here.

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