Lazard Inc (LAZ) 2006 Q4 法說會逐字稿

Good morning and welcome to Lazard's fourth quarter and full year 2006 earnings conference call. This call is being recorded today, February 7, 2007. At this time all participants are in a listen-only mode. (OPERATOR INSTRUCTIONS). At this time I will turn the call over to Judi Frost Mackey, Lazard's Senior Vice President and Director of Global Communications.

Thank you. Good morning. We welcome you to this conference call to review Lazard's results for the full year and fourth quarter of 2006. I'm Judi Mackey, and participating on the call today are Lazard's Chairman and Chief Executive Officer, Bruce Wasserstein, Vice Chairman Steven Golub, and Chief Financial Officer Michael Castellano. A replay of this call will be available on our Web site after 1 PM Eastern Standard Time this afternoon.

Today's call may contain forward-looking statements. Any forward-looking statements are based on our current expectations and projections about future events. They are subject to known and unknown risks, uncertainties and assumptions. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. These factors include, but are not limited to, those discussed in Lazard's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Management cannot guarantee future results, the level of activity, performance or achievements. Moreover, Lazard assumes no responsibility for the accuracy or completeness of any of these forward-looking statements. Investors should not rely upon forward-looking statements as predictions of future events. Lazard is under no duty to update any of these forward-looking statements after the date on which they are made. Further, investors should keep in mind that Lazard's quarterly revenue and profits can fluctuate materially depending on many factors, including the number and size of completed transactions on which we advised, as well as on seasonal factors. As such, Lazard management believes that annual results are the most meaningful. Accordingly, Lazard's revenue and profits in any particular quarter may not be indicative of future results. It is for this reason that Lazard limits our conference calls to twice per year to review our first-half and full-year results.

I will turn the call over to Mr. Wasserstein now.

Good morning. Thank you for joining us to discuss the results for Lazard's 2006 full year and fourth quarter. This morning, we announced record results in both our Financial Advisory and Asset Management businesses. Our annual operating revenue was 1.57 billion. This included an annual operating revenue increase of 13% in Financial Advisory to 973 million, and an increase of 18% in Asset Management to 548 million. Net income on a fully exchanged basis increased 37% for the year to a record 236 million, or $2.24 per share. Our net income on a fully exchanged basis increased 50% for the fourth quarter to a record 86 million, or $0.78 per share.

We are pleased with these exceptional results. This represents the first full year for Lazard as a publicly-traded firm. Our results demonstrate the continued effectiveness of our simple business model. Although markets and our results will fluctuate from year-to-year, our strategic plan is to deliver an average annual earnings per share growth of over 20% during the next five years, while continuing to invest in our core businesses.

In addition, we may extend our platform by product or geography through hiring talent or lift outs, or by making selective acquisitions in our Advisory or Asset Management businesses. These 2006 results reflect the successful execution of our strategy in both Financial Advisory and Asset Management. We are committed to achieving excellence on a local, global and industry level.

In Financial Advisory, we had a record year in M&A revenue and were involved in some of the most complex and important transactions. These assignments involved independent advice and required intellectual rigor, the hallmarks of Lazard, and reinforce our strong position in both domestic and cross-border transactions.

We are particularly pleased to have successfully implemented our three-year plan in Asset Management, with strong investment returns across a wide range of products. This has resulted in our gathering substantial additional assets in many strategies and markets around the world. In 2006, our Asset Management business achieved a record of 110.4 billion of assets under management, and realized an 18% growth in revenue. We continue to win new mandates with expanded product offerings and are benefiting from our investments in talent and global distribution efforts. We are very pleased with the accomplishments of our Asset Management team.

During the year, we continued to make progress throughout our businesses in areas where we invested in talent and focused on growth for the Firm. For example, we restructured our European investment banking leadership team under Georges Ralli and William Rucker, bringing clarity to our European organization and reinforcing a seamless cross-border business. By hiring a number of top talented professionals across Europe and in the U.S., we further reinforced our Financial Advisory business. This supports our strategic plan to continue to grow the worldwide Advisory group at the senior level.

Investment into Asia and Pacific continued. We opened an office in Beijing, added senior talent in Singapore, and expanded our Asset Management business in Australia and Korea.

We also completed our second public equity offering in December, with net proceeds to Lazard of approximately $350 million. We will reinvest these proceeds in our businesses to accelerate growth in strategic areas that support our vision for the future.

Lazard has a number of distinctive traits that are not easily replicated. Lazard is a premium financial services firm, committed to excellence. Second, we have a unique business model with a healthy balance between our Financial Advisory and Asset Management businesses. Our Financial Advisory revenues are of similar size and scale to the larger diversified competitors. Our Asset Management business operates on a global platform and continues to gather strength. Third, we are a global firm of major scale, with professionals deeply rooted locally in 29 cities and 16 countries. We also have specialists in every major and industry sector, as well as a market-leading restructuring team. Fourth, our businesses have significant operating leverage. We have demonstrated that we can control costs while growing revenue. Fifth, Lazard provides an environment that breeds success, encourages individual creativity, allows senior talent to focus on clients and rewards people competitively. As a result, we attract and retain some of the most talented people in the business. Finally, we are proud of our history. Our premier financial services brand and reputation as trusted advisors has been established by our distinctive, tailored approach to advising clients and managing assets for nearly 160 years.

We have adhered to our promise of creating value for our shareholders while providing a premium level of service to our clients. I believe that Lazard's unique collection of assets and capability distinguishes us from our competition. We are committed to investing in the franchise for the benefit of our shareholders, clients and employees, and believe we are on a path toward continued growth.

I will now turn the call over to Steve Golub, who will discuss our businesses and financial performance in more detail. Steve?

Good morning and thank you for joining us today. As Bruce mentioned, we are pleased with our exceptional results for the full year and fourth quarter of 2006. Our financial results demonstrate the continued demand for world-class independent advice.

We achieved record annual operating revenue of $1.57 billion, an increase of 16% over last year, which, through our operating leverage, resulted in an increase of 37% in net income to $236 million on a fully exchanged basis. This performance reflects solid growth in both our Financial Advisory and Asset Management businesses.

Our Financial Advisory business achieved 13% annual revenue growth, to a record $973 million for 2006, led by strong performance in M&A and private fund advisory. For the full year of 2006, M&A revenue increased 17%, to a record $793 million, driven by the demand for independent advice and the continued strong environment for M&A activity.

Corporate Finance and Other revenue increased 26% to $110 million, principally as a result of increased revenue in our Private Fund Advisory, Private Investment in Public Equity, or PIPE, and Registered Direct Offering businesses.

Lazard's M&A group advised on a number of notable transactions that closed during the fourth quarter, which led to a record quarter for Financial Advisory revenue. These transactions included Pfizer's $16.6 billion sale of its consumer business, Cerberus Consortium's $14 billion acquisition of a controlling stake in GMAC, Fisher Scientific's $12.8 billion merger with Thermo Electron, and Caisse d'Epargne's reorganization of its Caisse des Depots et Consignations partnership and its negotiations with Groupe Banque Populaire in the creation of NATIXIS.

Our M&A backlog remains strong and reflects several important domestic, international and cross-border announced M&A transactions, including Mellon Financial's $16.5 billion merger with The Bank of New York, KeySpan's $11.8 billion sale to National Grid, Schneider Electric's $6.1 billion acquisition of American Power Conversion, TransCanada's $4.4 billion acquisition of U.S. natural gas pipeline and storage assets from El Paso, Cap Gemini's $1.3 billion acquisition of Kanbay International, American Standard's plan to separate its three businesses, and Eutelsat Communication's ownership restructuring.

Our market-leading Financial Restructuring franchise has recently worked on a number of notable restructuring assignments, including those involving Owens Corning, Meridian Automotive, and InSight Health Services, and Dura Automotive, and it continues to advise Collins & Aikman, Eurotunnel, SunCom Wireless, Tower Automotive, Calpine's Unsecured Creditors Committee, Northwest Airline's Creditor Committee, and the UAW in connection with Delphi's bankruptcy and DaimlerChrysler's post-retirement healthcare obligations. All this activity took place in an environment where industry-wide financial restructuring activity remained relatively flat, with no increase in the amount of corporate debt defaults.

Turning to our Asset Management businesses, as Bruce mentioned, we reported 18% revenue growth for the full year of 2006, to a record $548 million, management fees increased 16% to a record $450 million, and incentive fees increased 30% to $59 million for the full year of 2006.

Assets under management at the end of 2006 grew to more than $110 billion, a record level, representing a 25% increase over year-end 2005. Although a significant portion of the increase is due to market appreciation, we are pleased that net inflows for the full year were $2.8 billion, including net inflows of 1.8 billion in the fourth quarter. We have, therefore, achieved net inflows for four of the last five quarters.

Overall, we believe we are well positioned for long-term growth. I will now turn the call over to Mike Castellano, who will provide more details on our financial results.

Thank you, Steve. I will focus certain of my remarks on comparing our results to the pro forma 2005 results mentioned in our earnings release, since the restructuring and financing of the Firm changed significantly with our IPO in May of 2005, and since the historical results prior to the IPO treat the Company as a partnership for accounting purposes, and therefore, historical results for periods prior to and subsequent to the IPO on May 10, 2005 are not comparable.

As Bruce and Steve have commented, 2006 operating revenue increased to a record level, with Lazard's fourth-quarter results continuing the strong momentum of our performance for the first nine months of 2006.

For the fourth quarter of 2006, both our Financial Advisory and Asset Management businesses significantly increased revenue period over period. For the fourth quarter of 2006 compared to the fourth quarter of 2005, Financial Advisory revenue increased 27% to a quarterly record of $302 million, reflecting increases in industry-wide completed mergers and acquisitions.

M&A revenue increased 35% to 247 million for the fourth quarter of 2006, marking the best quarterly performance in M&A revenue since the fourth quarter of 2000.

Financial Restructuring revenue was $20 million for the fourth quarter, compared to 23 million for the fourth quarter of 2005. Corporate Finance and Other revenue increased 6%, to $34 million from $32 million in 2005, principally due to increased revenue from our PIPEs and Registered Direct Offering businesses.

Asset Management business revenue increased 25% for the fourth quarter of 2006, to a quarterly record of 175 million, reflecting strong growth in both management and incentive fees. Management fees increased 24% in the fourth quarter, to 122 million, representing the highest quarterly management fees we have ever achieved.

The 24% increase in incentive fees, to $42 million in the fourth quarter from 34 million in the same period of 2005, reflects better performance in certain funds that provide for such incentive fees with a measurement date in the fourth quarter.

Our compensation and benefits expense to operating revenue ratio declined to 56.7% for the full year of 2006, from 57% for 2005. Compensation and benefits expense increased 15% to 891 million for 2006, which is modestly less than the 16% growth in operating revenue for the same period.

Non-compensation expenses, excluding the effects of the provisions of our tax receivable agreement, were $269 million, or 17% of operating revenue, and 76 million, or 15% of operating revenue for the 2006 full year and fourth quarter, respectively. Non-compensation expenses were approximately 19% of operating revenue for both periods in 2005. The decrease in the ratio is due to the operating leverage from higher operating revenue and cost containment initiatives, offset by increases in professional fees, principally due to consulting fees related to legal and outsource services, as well as costs to comply with Sarbanes-Oxley. This strong operating leverage drove the 31% and 49% increases in operating revenue for the 2006 full year and fourth quarter, respectively, to 327 million and 115 million, respectively. We remain committed to containing our annual non-compensation costs.

The effective income tax rate for the year, including the effects of the provisions of our tax receivable agreement and assuming full exchange of outstanding exchangeable interest, was 28% for 2006. The effective tax rate for both -- for the year before exchange of those exchangeable interests was 21%.

Pro forma net income on a fully exchanged basis increased 37% to 236 million, or $2.24 per diluted share for the full year 2006, and increased 50% to 86 million, or $0.76 per diluted share for the fourth quarter. Our continued growth in earnings is a result of several factors, including strong growth in revenue and our operating leverage, achieved through our ability to contain costs.

Thank you again for joining us. We will now take your questions. Operator?

(OPERATOR INSTRUCTIONS). William Tanona, Goldman Sachs.

Just a couple of quick questions on the Asset Management side of the business. Obviously, we know you guys won a couple of key mandates there from Vanguard. Just kind of want to get an understanding of when we can kind of expect those net flows to be showing up over the course of 2007. Would you expect it to be lumpy or pretty consistent across all four quarters?

The Vanguard inflows -- the Vanguard flows will come in in the first quarter.

Great. That's helpful. And then, if I look at kind of the alternative assets under management, it seems to have remained relatively flat year-over-year. Obviously, we know there's significant growth in that channel, and we've also seen significant growth in your incentive fee bucket. I'm just trying to kind of put those two together. Are there other incentive fees in some of your traditional long-only products? And if so, how do we kind of get that bucket of the alternatives moving in the right direction?

It was relatively flat as you looked over the whole year. Our performance improved in the products, and we are continuing to look at new strategies and how we might expand that business over time.

I think that's a good point, because, obviously, we want to build on the platform that we have. We think we have good momentum and a good infrastructure. And as a strategic plan, we would expect to continue to have -- do launches again, commencing sometime this year.

And so, is the increase in the incentive fees that we saw year-over-year essentially on that same level of assets, so implying that the performance of those products were better this year then they were last?

That's a good assumption.

Lastly, in terms of on the Financial Advisory side, can you talk a little bit about your pipeline? I would imagine, obviously, it's very strong, and we saw the list of deals that you put in the release. But just giving us a sense as to how you think about '07 versus '06 last year.

I think what we had said is that the environment is good and we're well placed in the environment. And I think that's about as far as we can go. But, the global conditions are such as to say for the long-term, and the immediate outlook is conducive to strategic activity.

Guy Moszkowski, Merrill Lynch.

Let me see if I can try and come back to the last question a little bit on the outlook, and see if we can frame it a different way. Are there internal measures of pipeline or backlog in terms of your Advisory business that you use that you could share trend information with [on] us? For example, how would that backlog or pipeline look as of year-end, or currently compared to, say, three months ago or a year ago?

I would say a couple of things. First of all, we, obviously, internally have statistics on all sorts of stuff. But, I would tell you that at this time of year, whatever data we had isn't really very significant, just because of the seasonality of the way things are done, which is also -- as you get further in the year, there is a point at which you can have six-month visibility, but it is in some ways seasonal. So, I get back to the point, which is a very qualitative point, which is it's a good environment, and we feel that we're well placed competitively to prosper on a relative basis in that environment.

Fair enough. My other questions are really much more on the sort of expense and tax side. You're non-compensation expense, when we annualize the fourth quarter, it's quite a bit higher than sort of your full-year run rate guidance. It's hard to argue with the non-comp costs at this point, given the operating leverage that you've produced, the strength of the revenue. But, is the increase that we saw more seasonal than anything else? Or is it -- should we be thinking in terms of more like 300 million as a run rate for those non-comp expenses?

I think what you saw in the fourth quarter is the same pattern that you've seen for a couple of years now. The fourth quarter traditionally is just a seasonally-high number. Without wanting to sort of specifically say a number that we would target for the year, I would put it more in the context of what we've talked about before. Our goal is to keep a very sharp focus on keeping those costs coming down, and, where we can, to offset areas such as we continue to look for opportunities to outsource some activities, where there could be some increases, and to keep that overall level in the low single digits, the level of increase in the low single digits. And we're really not much different in terms of our focus for that.

Thank you. That helps. Actually, if you don't mind, I am going to come back to the sort of M&A revenue question again, not in terms so much of the outlook, but maybe you can talk to us a little bit about how, if at all, your geographic mix in your investment banking business trended during 2006 from the early quarters to the latter quarters, and how you see that trending as we enter 2007.

You'll see we'll put up on our Web site later some geographic information. Our business historically, if you look year-to-year, has been roughly 50/50 between Europe and North America, with a small amount coming from the rest of the world and emerging markets. And that -- one year, Europe could be up a little more; next year North America could be up a little more. This year, North America is probably around 55% and Europe is around 41, 42%. And you'll see that when you take a look at our Web site later.

But I would add to that that we like the tone of our business in all three areas. And let me go through them separately. In Europe, we really are beginning to feel the effect of our reorganization that we've had. We think it's very oriented toward enhancing our comparative capability on cross-border transactions, and our ability to bring in industry specialists. The leadership also facilitates acceleration in our marketing and hiring in Europe, so I'm quite pleased with the progress that we have had. And the way I measure these things, which is, obviously, somewhat difficult from the outside, is the building of our portfolio of relationships. Because the way we think about these things is as we develop relationships, we're building annuities for the future. And we think we're doing quite well in doing that.

In the United States, we continue to see many growth opportunities, and what we're doing is filling out the frame that we have in extending, deepening Lazard's geographic reach, particularly West Coast, Texas, Midwest, in addition to our historic base in New York. On the Pacific and emerging markets, we've had a number of good developments, and I view this as a very long-term investment. But, we have been quite pleased with our position out of Brazil in particular. I'd bring that to people's attention, which was, obviously, involved in that Corus auction. And what that demonstrates is a real presence in one of the growing markets.

We're pleased with the way things are developing in our position in India. We think we have a high-quality office there. And, as you know, historically we have been strong in Japan. I think the activity levels over the next couple of years will start increasing there. And we have, obviously, invested in having an execution capability in Mainland China, opening up the Beijing office, and supplementing our people in Singapore. So, we think we have a good framework. We'll continue to invest in those geographic areas over time.

That's very helpful. Thank you.

(OPERATOR INSTRUCTIONS). Michael Hecht, Banc of America.

I wanted to come back on just a little bit on the outlook on the M&A side. I thought maybe you guys could talk just a little bit about where you think we are kind of in the M&A cycle overall. Does it feel like we're more in the third or fourth inning, or more like the eighth or ninth inning?

We're run our business on the basis of not trying to reach the height of the cycle, but to go through what we think will be the secular growth of the business over a longer time period. I think when people do their regression analyses, and I've seen a lot of the analyst reports, there are a couple of issues with the idea of history as prologue.

It is true that since the Civil War, there have been these industrial cycles in the United States. The point that I would make about M&A cycles are -- first, when we're talking about the M&A business, we're talking about a global business. So, a lot of those statistics relate to U.S. activity. There wasn't historically this sort of activity level in Europe overall. I believe that the trend toward global consolidation is a very long-term trend. And so, it won't exactly repeat some of the trends of the past.

Secondly, a lot of that data historically was focused on the industrial world. Just like when you look at economic life in the city or in the country, there's obviously been a migration of the mix of assets. And as we look at the things that are driving a lot of the activity -- technology, financial services, healthcare -- there's a lot of variation or co-variance in the cycle. And in addition, you may have noted this popularity of infrastructure funds and investments. Well, as you have an emerging world and those developments, the pattern of derivatives of that activity is again different than what was an American historic cycle.

So, I think you have to look at things more broadly. And we do think things will -- there will be cycles; there is no question about it. We think we're well-situated for cycles, partly because of our reorganization activity, partly because of our alternatives activity, and partly because we have a balanced M&A portfolio. But, we also think that investing in the idea of global economic development is a good concept. And that's basically what we're doing, is we're sort of taking a 10-year view of where the world will be, and trying to invest commensurate with that, and building solid businesses to last over time.

That's helpful. Thanks. Just a follow-up on a response to an earlier question -- it sounds like you're pretty optimistic on strategic buying activity on the M&A front. I'm just wondering if you can comment on what you see and expect on the financial sponsor front, and whether you feel like Lazard is any better positioned in one area versus the other.

That's a very good question, actually. Partly, I think it's a very helpful question, and also supplementing the answer to the previous question on cycles. Because if you look at the private buyer activity in the funds, taking economic outlook, things are booming or things are under stress, the people who bought all these assets are obligated to their fundholders at some point in time to do something with those assets. So, if you look at the cycle, there's a softening of the back-end of the cycle, because there will be a viscosity of assets from the portfolio that they've accumulated. And so, the timing of things is a little different than it was historically. Because historically, you didn't have the situation where whatever the statistic of the year, 20% or 25% of activity, has been going to private buyers. So, that's one point.

As to our activity with private buyers, around the world we have different types of levels of activities as relates to them. In the United States, on the larger transactions, we have been most often involved on the corporate side, and often on the special committee side -- Clear Channel being an example of that, but there are many examples of it. And so, that's been, obviously, helpful to us. We have been quite active at all levels in Europe with private buyers. And so, anything that basically helps stimulate activity, we get a benefit from. The vehicle may be not as direct as one would perhaps try to think, but it does in fact benefit us.

The only thing I would add to Bruce's comments is in our Private Fund Advisory group, which raises money for the private equity firms and accounts for a significant part of our growth in our Corporate Finance and Other category and our Financial Advisory group. And that continues to be a strong business for us.

That's helpful. Maybe just following up on that, it seems like the PIPEs business has taken off nicely. Any color commentary just on outlook there? Are you guys kind of really just getting started there, and you see continued activity there?

It's a group that we brought on board at the beginning of the fourth quarter. They had a good fourth quarter. We're continuing to, hopefully, see a good trend in that business as we move forward.

That's great. Just the last question on operating leverage you kind of see going forward. Obviously, you had great leverage last year across both comp and non-comp expense. The comp ratio came down probably about 30 basis points, and a little bit more leverage coming from the non-comp side. Assuming a reasonably-good topline environment kind of continues here, should we expect more leverage in the model going forward?

We expect if we can -- as revenue growth continues that we can continue that operating leverage going forward.

(OPERATOR INSTRUCTIONS). Prashant Bhatia, Citigroup.

Just in terms of the investments, you've got, like you said, $350 million. Can you help us think about maybe some of the priorities that you want to address first, in terms of where you could put some of that to work, and maybe just the pace of using that $350 million pool to invest?

When we did that offering, what we said on the roadshow was -- and in the prospectus was that we would use it for various purposes. One purpose is to help seed funds that will be new funds in our Asset Management area, or to augment the funds in some of the emerging newer funds in Asset Management, including some of those alternative funds that were discussed earlier in the call.

Secondly, they may be used for acquisitions. We have a head of strategy, [Alex Stern]. He spends full time thinking about things. We have thought about a variety of possibilities, as is said in the press release, that either extend us by geography or by product line, or enhance what we're doing. And examples of that in Asset Management would be areas that augment our depth of style in some area. I use the example of a (indiscernible) shop, I guess, theoretically, although there's nothing pending on these things. But, that's an example.

We would also think about enhancing our private asset management high net worth-type of activity, which we have now in France, and in -- to some degree in the United States. But we could easily expand that and leverage some of our other capabilities. That's something we're debating. There are geographic possibilities on the Asset Management side, and there are geographic possibilities on the Advisory side.

For example, we did spend some money to take a position in that Brazilian operation I mentioned before. And we might do other things geographically. If there were a niche player by product, for example, in the United States, some smaller firm that was a specialist in the widget industry, and we thought it was up to our standards, that's a possibility we would look at that, versus hiring two widget partners. So, we're looking at all of that. It's an intense process. But, at the moment, we're not imminently announcing anything.

It sounds like a lot of different small opportunities in terms of spending the 350, and maybe more of a bias towards seeding and buying teams, versus buying entire franchises on a larger scale. Is that accurate?

What was said was accurate in the release, which is we'll look at all these areas. If unique opportunities come up, we'd take advantage of the unique opportunities.

Okay. Also, on the Vanguard mandates, I guess, when you were considering these mandates, it looks like these are relatively thin revenue yields, kind of 10 basis point-type of assets. How do you think about using, I guess, your incremental capacity with managing assets that are generating relatively thin yields, versus maybe trying to gain mandates where you can get 100 basis point-type yields. How do you think about that mix?

We think about building our business. And we think Vanguard is a very fine firm, and we're very pleased to have the mandate.

So, in terms of having -- I guess what I'm getting at is your cost structure isn't necessarily the type of cost structure that would fit into a Vanguard-type revenue stream, at least we don't think of it as that type of cost structure.

Bruce's answer was really the appropriate answer. We think it's a great mandate for us, we are proud to have been selected, and we think it fits very nicely into our operating leverage structure.

So, you're basically looking at it in terms of incremental revenue on a similar cost base, I guess?

The answer we gave is really the answer.

In terms of the cycle and thinking about the restructuring side of the business, we're clearly at a point where that's slow. As you look at -- across industries, where there's a fair amount of liquidity, I guess, thinking out a couple of years down the road, any areas that you'd highlight that would potentially, in terms of industries, be good candidates for (technical difficulty) restructuring type situations?

The way we look at it, first of all, the skills of the people involved are beneficial to all our activity, first. Secondly, we also look at it as sort of an insurance policy for us and also for our clients, to understand how to restructure transactions. But, I would also add that from their perspective, if you speak to the restructuring guys, they have big [maps] where they keep the leverage ratios in mind and look at transactions and run their correlations. And at some point, they believe a day will come where there'll be increased restructuring, and they, obviously, relate that to coverage-type statistics.

There are other people who would say, on the other hand, there's more liquidity in the system that they will stretch out, etcetera, etcetera. That's what makes the market. From our point of view, as a firm, we obviously wish the best. We think people shouldn't press the envelope past the prudent; it's not good for anyone to have -- the term, I guess, was -- irrational exuberance on either the equity side or the debt side. And we're with you. We'll keep watching this space.

At this time there are no further questions. This concludes today's call. We thank you for your participation, and have a wonderful day.