Salli Schwartz - Global Head, Investor Relations Ray McDaniel - President and Chief Executive Officer Linda Huber - Executive Vice President and Chief Financial Officer Mark Almeida - President, Moody's Analytics Michel Madelain - President and Chief Operating Officer, Moody's Investor Service

Manav Patnaik - Barclays Andre Benjamin - Goldman Sachs Joseph Foresi - Janney Bill Bird - FBR Bill Warmington - Wells Fargo Peter Appert - Pipe Jaffray Craig Huber - Huber Research Partners Tim McHugh - William Blair & Company Vincent Hung - Autonomous Doug Arthur - Huber Research Patrick O'Shaughnessy - Raymond James

Good day and welcome ladies and gentlemen to the Moody's Corporation First Quarter 2015 Earnings Conference Call. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company we will open the conference up for question-and-answers following the presentation. 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 first quarter 2015 results as well as our updated outlook for full year 2015. I am Salli Schwartz, Global Head of Investor Relations. This morning, Moody's released its results for the first quarter of 2015 as well as our updated outlook for full year 2015. The earnings press release and a presentation to accompany this teleconference are both available on our Web site at ir.moodys.com. Ray McDaniel, Moody's President and Chief Executive Officer will lead this morning's conference call. Also making prepared remarks on the call this morning is Linda Huber, Moody's Executive Vice President and Chief Financial Officer. 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 reports on Form 10-K for the year ended December 31, 2014, and in other SEC filings made by the company, which are available on our Web site and on the Securities and Exchange Commission's Web site. 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 first quarter 2015 results, Linda will follow with additional financial detail and operating highlights. As we have no legal or regulatory updates, I will conclude the comments on our outlook for 2015. After our prepared remarks we will respond to your questions. In the first quarter, Moody's delivered revenue of $866 million, an increase of 13% over the first quarter of 2014. On a constant currency basis Moody's revenue was up 18% year-over-year. Excluding the 2014 consolidation of ICRA and our 2014 acquisitions of Lewtan Technologies and WebEquity Solutions as well as the impact of foreign currency translation Moody's revenue grew 16% year-on-year. Operating expense for the first quarter was $494 million up 14% from the first quarter of 2014. Operating income was $371 million a 12% increase from the prior year period. Adjusted operating income defined as operating income less depreciation and amortization was $400 million also up 12% from the same period last year. Foreign currency translation unfavorably impacted operating income by 7%. Operating margin for the quarter was 42.9% while adjusted operating margin was 46.2%. Diluted earnings per share of $1.11 increased 11% from the prior year period. We are reaffirming our full year 2015 earnings per share guidance of $4.55 to $4.65 despite our expectations for uneven global growth as well as the strength of the US dollar at current exchange rates. 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 first quarter increased 13% to $866 million. Foreign currency translation unfavorably impacted Moody's revenue by 5%. U.S. revenue of $500 million was up 17% from the first quarter of 2014. Non-U.S. revenue of $366 million was up 7% and represented 42% of Moody's total revenue. Recurring revenue of $124 million represented 49% of total revenue. Looking now at each of our business starting with Moody's Investors Service, total MIS revenue for the quarter was $602 million up 14% from the prior year period. Foreign currency translation unfavorably impacted MIS revenue by 5%. U.S. revenue increased 18% to $372 million. Revenue outside of the U.S. was $231 million increased 8% and represented 38% of total ratings revenue. Excluding the 2014 consolidation of ICRA MIS revenue increased 12%. Moving now to the lines of business for MIS, first global corporate finance revenue in the first quarter was up 13% to $299 million, reflecting increased investment-grade issuance from heightened M&A activity as well as strong investor demand for high yield bond, partially offsetting these gains with the contraction impact loan issuance. U.S. corporate finance revenue increased 13% while non-U.S. corporate finance revenue increased 14%. Second, global structured financed revenue for first quarter was $101 million 6% above the prior year period. This increase was primarily the result of strong U.S. commercial real-estate issuance. U.S. structured finance revenue increased 13% while non-U.S. structured finance revenue decreased 6%. Third global financial institutions revenue of $94 million increased 10% from the same quarter of 2014 primarily due to increased revenue from U.S. finance companies and insurers. This benefit was partially offset by a decline in revenue from global managed investment issuers who experienced elevated activity in the prior year period. U.S. and non-U.S. financial institution revenue increased 19% and 4% respectively year-over-year. Fourth, global public project and infrastructure finance revenue increased 25% year-over-year to $101 million resulting from increases in U.S. municipal financing activity and global municipal infrastructure issuance. U.S. public project and infrastructure revenue increased 37% and non-U.S. revenue increased 7%. As a reminder MIS other consist of non-rating revenue from ICRA and Korea Investor Service or KIS. MIS other contributed $8 million to MIS revenue in the first quarter compared to $3 million in the prior year period. Turning now to Moody's Analytics. Global revenue for MA is $263 million was up 11% from the first quarter of 2014. Foreign currency translation unfavorably impacted MA revenue by 5%. U.S. revenue grew by 17% year-over-year to $128 million. Non-U.S. revenue increased 5% to $135 million and represented 51% of total MA revenue. Excluding the 2014 acquisitions of Lewtan Technologies and WebEquity Solutions MA revenue grew 7% year-over-year. Moving now to the lines of business for MA. First, global research, data and analytics or RD&A, revenue of $150 million increased 9% from the prior year period. Growth reflected strong sales of credit research and licensing of ratings status and 96% customer retention rate and the acquisition of Lewtan Technologies in October 2014. Year-over-year U.S. revenue was up 13% and non-U.S. revenue was up 3%. Second enterprise risk solutions, or ERS, revenue of $77 million grew 29% from last year. This increase resulted from strong project delivery across all product offerings as well as the acquisition of WebEquity Solutions in July 2014. Revenue was up 41% in the U.S. and 22% outside the U.S. Trailing 12-months revenue and sales for ERS increased to 28% and 24% respectively. As noted in the past due to the variable nature of project timing in completion ERS revenue remained subject to quarterly volatility. Third, global professional services revenue decreased 10% to $37 million primarily due to the year-over-year effect of existing certain Copal Amba product line in late 2014. U.S. revenue decreased 4% and non-U.S. decreased 13%. Turning to now to expense, Moody's first quarter expense increased 14% to $494 million, primarily due to hiring in 2014 and the first quarter of 2015, as well as added operating expense from our 2014 acquisition. Foreign currency translation favorably impacted expense by 4%. Excluding the 2014 consolidation of ICRA and our 2014 acquisitions of Lewtan Technologies and WebEquity Solutions Moody's expense grew 9% year-over-year. Moody's reported operating margin and adjusted operating margin were both down slightly in the quarter to 42.9% and 46.2% respectively. Excluding the 2014 consolidation of ICRA and our 2014 acquisitions of Lewtan Technologies and WebEquity Solutions Moody's added more than 100 basis points of operating leverage year-over-year. Moody's effective tax rate for the first quarter was 32.9% compared to 28.9% for the prior year period primarily due to a benefit from the resolution of foreign tax audit in the prior year period. Now I'll provide an update on capital allocation. During the first quarter of 2015 Moody's repurchased 3.8 million shares at a total cost of $366 million and issued 2.3 million shares under its annual employee stock-based compensation plan. Outstanding shares as of March 31, 2015 total 202.2 million and 5% from the prior year. As of March 31st Moody's had $1.2 billion of share repurchase authority remaining. On March 9, 2015 Moody's issued €500 million of 12 year senior unsecured notes at 1.75%. This transaction provides both cost effective financing and a partial hedge for the company's euro exposure. At quarter end Moody's had $3.1 billion of outstanding debt and $1 billion of additional debt capacity available under its revolving credit facility. Total cash, cash equivalent and short-term investments at quarter end were $2 billion, down $50 million from a year earlier. Free cash flow in the first quarter of 2015 was $242.8 million, up 54% from the first quarter of 2014 due to the increase in net income and changes in working capital. As of March 31, 2015 approximately 63% of Moody's cash holding were maintained outside U.S. On April 17, 2015 Moody's announced a quarterly dividend of $0.34 per share of Moody's common stock payable on June 10th to the stockholders of record at the close of business on May 20th. And with that I will turn the call back over to Ray.

Thanks Linda. I'll conclude this morning's prepared remarks by discussing our 2015 full year guidance. Moody's outlook for 2015 is based on assumptions about many macroeconomic and capital market factors including interest rates, foreign currency exchange rates, corporate profitability and business investment spending, mergers and acquisitions, consumer borrowing and securitization and the amount of debt issued. These assumptions are subject to some degree of uncertainty and results for the year could differ materially from our current outlook. Moody's guidance assumes foreign currency translation at end of quarter exchange rates including $1.48 to the pound and $1.07 to the euro. Moody's still expects full year 2015 revenue to grow in the mid single-digit percent range. However on a constant dollar basis Moody's full year 2015 revenue and operating expense growth rates would now both be 4% to 5% higher up from the approximately 3% higher than we communicated in February. The company still expects diluted earnings per share in the range of $4.55 to $4.65. For global MIS Moody's still expects 2015 revenue to grow in the mid single-digit percent range. However MIS's U.S. revenue is now expected to grow in the high single-digit percent range while non-U.S. revenue is now expected to increase in the low single-digit percent range. Within MIS both structured finance revenue and financial institutions revenue are now expected to grow in the low single-digit percent range. For global MA 2015 revenue is still expected to increase in the mid single-digit percent range. However MA U.S. revenue is now expected to grow in the low double-digit percent range. While non-US revenue is now expected to increase in the low single-digit percent range. Within MA professional services revenue is now expected to decrease in the low single-digit percent range. This concludes our prepared remarks. And joining us for the question-and-answer session is Michel Madelain, President and Chief Operating Officer of Moody's Investor Service; and Mark Almeida, president of Moody's Analytics. We would be pleased to take any questions you might have.

[Operator Instructions]. Our first question from Manav Patnaik with Barclays.

The first question I had was just around the constant currency improvement. Generally may be you can tie that, was that increase more driven by the Moody's Analytics side or is that just more of the thing better than [indiscernible] some color there?

Manav I apologize I didn’t hear the beginning of your question if you repeat that I would appreciate it?

Yes it was just around the increased guidance on a constant currency basis, so just what the main drivers there were?

The underlying operating business is performing very well. And if not for the decline of the euro against the dollar we obviously as we communicated we would have had even stronger performance in the first quarter. Our current outlook as we said assumes the $1.07 to the euro and so that's absorbing as some of the strength of the underlying operating performance I think that's really the story.

And then you Linda on the expense side I mean you sited a favorable benefit of the FX on the expenses and still it looked like it was up double-digit. So A, is that mainly just because of the contribution of acquisitions and then can you help us bridge what you've given us before in terms of how we expect the expense to move quarterly to the end of the year?

Yes Manav, your point is correct that the FX impact actually benefits us on expenses and its 4% to 5% benefit, for the rest of the year we think on the expense line. In terms of the ramp for expenses for the rest of the year, this is one of the trickiest calls that we make and there are many things that can cause this number to move around. The expense number for the first quarter is been $494 million and from there now we’re looking at a ramp of about $30 million, but again I would emphasize that could be 25 million it could be 35 million and it's impacted by a number of things including our IT projects and of course that is absence any changes in incentive compensation as we end up doing better. So a good central scenario would be about $30 million but there is some flexibility around that. And please keep in mind that it's one of the tougher numbers to predict that we have to give you.

And just last one for me, it seems like you guys have had a pretty steady stream of the small sort of tuck in type of deals. Can you -- is that pipeline still pretty active should we be expecting more of these going forward?

As we've said before Manav we certainly are looking for opportunities to add attractive assets to the portfolio that we have. So yes we’re actively looking. But the opportunity to make good acquisitions that what we think our fair prices is lumpy. And we had a series of those last year more than we would normally or have normally had in individual year. So I would not draw from 2014 and try to extrapolate that in 2015.

We'll take our next question from Andre Benjamin with Goldman Sachs.

The question is on ERS, I know is up 29% in the first quarter. So I was just wondering if you could remind us why you're assuming such a sharp decelerations ahead mid single-digit growth for the year. And how we should think about the puts and takes that would drive upside and downside to that guidance.

I will ask Mark Almeida if he wouldn't mind commenting on that.

Sure. Andre I think it’s just a matter of or looking at the projects that we've got underway in the ERS business and having pretty good visibility into what work is going to get done and when it's going to be completed and what kind of revenue recognition we’re going to have. So the first quarter was very strong. It was largely in line with our expectations. So again it's really pretty straight forward and it's a function of the schedule of work that’s being done and when we expect it to complete.

I would just add to that, that it's also as much of a story about 2014 as it is 2015 and that we had a very strong fourth quarter, I mean 2014 in ERS which is making for more difficult comparables in the back half of the year. The other thing to add to that Andre is that we did have the WebEquity acquisition midyear last year, and we’re getting some benefits from that in the first half of this year we won't get as much benefit from it in the second half.

Then same business to global professional services I know you said part of the reason it was down was because of exiting certain products. I was wondering maybe little color on what that would have looked like if you have kept those products. And I don’t know how FX is weighing on that business in particular given its more international expose.

Andre it's Linda and Mark and I are going to tag team on this because I'm managing Copal Amba and he will comment on some other factors. As you saw in the earnings release and then also on the script we had exited part of the business for Copal Amba and that leads us revenue deficit of about $8 million $9 million that we’re looking to catch up from which makes it little harder to have growth on that line. Maybe Mark wants to talk little bit more about the other components of professional services.

The other big piece in professional services is our certification business in Canada and the Canadian dollar has fallen pretty sharply so we took a very big FX hit in Canada. So between what Linda described and the FX impacts on the training and certification business it create a lot of headwind for professional services overall.

We will take our next question from Alex Kramm with UBS.

Linda I think every quarter you kind of remind us what the pipeline is looking like, though pretty straight forward question any update you want to highlight particular?

Sure Alex, we can have it be pipeline time. So what I'll do is I'll note that these are the comments we've gotten from a collection of U.S. capital market's desks and what we’re talk about here first is just U.S. dollar markets and it doesn't align how Moody's thinks about revenue and expenses. So I want to talk about three different areas, investment-grade bonds, and high yield bonds and then leverage loan. And then I'll provide some comments on Europe. So let's look at investment-grade bonds first, for the first quarter of 2015 we have $350 billion of U.S. issuance which is up 20% year-over-year. For the full year the banks are now expecting 1.1 trillion of U.S. high grade issuance, note that that's up 10% from the forecast that we received in the beginning of the year that we had said at that time we're about flat. You will note that these forecast at the beginning of the year are always very speculative and they always move around. So the state of the U.S. high grade markets is very strong and first quarter of '15 it was a new single quarter record for issuance in the investment grade bond markets in the U.S. there were jumbo acquisitions from AT&T at 17.5 billion and Oracle at 10 billion, we’re anticipating a very busy May as investor demand remains strong. So that's been driven by M&A financing, financial company and bank issuance and opportunistic activity if in fact there is a fed raise later in the year. The current pipeline is described as robust and we don’t see that word too often with many jumbo transactions expected and the bodice that May could rival March in terms of high volume again March was 140 billion. So we've had some pretty heavy quarters here for U.S. investment grade. Let's look at high yield bonds, for the first quarter of 2015 a $100 billion of issuance that's up 20% year-on-year and for the full year we're looking at 300 billion of issuance, again about flat outlook there is an upgrade from the prior down 10% yield that we had seen at the beginning of the year. So the state of the market is very strong, positive funds flows throughout the year so far, rents are performing well and the pipeline is described as average to robust. Now leverage loans which in some sense are a substitute for high yield bonds are not looking robust, this is a result of some changes in what we're seeing from the fed, if you look at the shared national credit program and a press release from November 7th that said had some concerns about high leverage levers and syndicated loans. And again program covers loans of $20 million or more with three or more banks in the deal. So the fed talked about it concerns that has had downward pressure on leverage loans. In any case $100 billion for the first quarter of 2015 down 45% year-on-year 350 billion forecast for the year which is down 20%. The market continues to see a little bit of weakness as I said because of the fed oversight and issuers however have strong demand, are showing strong demand for the paper. The pipeline is judged to be average at this point and we still see a strong year-to-date CLO issuance, 30 billion for the first quarter of 2015 versus 23 billion in the first quarter of '14 and the last two weeks have been positive funds closed into leverage loans. Now let's look at Europe and what we're seeing in Europe. Investment grade in Europe first quarter saw very heavy supply driven particularly by surge in issuance from U.S. based issuers wishing to lock in historically low rates as you probably saw Moody's was part of that, the pipeline looks to be above average in May. Now some of that attractive spread level and the attractive issuance conditions in Europe has weakened a little bit, the conditions were probably in the first quarter but we continue to see above average pipeline. High yield a bit different, market is very strong in Europe up 30% over the same time last year, a record Q1, strong April, good inflows into European high yield and that market looks to be quite attractive right now. So overall U.S. investment grade very robust high yield bonds, robust leverage loans, not so much, Europe investment grade pretty good may be we saw peak opportunity in the first quarter and high yield continues to look pretty good in Europe. So is that sufficient Alex?

As detailed as anyone can hope for but may be just couple of things, just to add there. Obviously you highlighted the leverage loans and the fed and also I forgot the word that you used but you said high yields and leverage loans sometimes work, no, counter cyclical is that the right word to use? So if leverage loans come into continues pressure, do you think the high yield market can absorb that, and is that from a margin profitability perspective in particular if you add the CLO side, are you comfortable that those two businesses, that the high yield market will be enough there from your perspective. And then secondly, sorry for the long question, secondly on the European side, am I reading it right that you're actually feeling better about how Europe is going so far but that it's really the FX that's the impact there?

To deal with your first question Alex I would say that high yield bonds and leverage loans are substitutes for each other, they are counter cyclical that's little bit of different thing, it's a substitution effect. So we are pretty indifferent as to whether we raise bonds or loans, any kind of speculative grade security we're able to price a little higher for so we're happy with either. We released a piece of research yesterday on this situation with the fed and leverage loans and it might be interesting for people on the call to get that. But what we see is that more capital has to be allocated to those leverage loans and there is stricter lending guidance on the bulk of those leverage loans. And the price if a loan is sold to the CLO vehicle. So we would expect that that would continue and we will find that the bond being stronger. Now in Europe issuance conditions are pretty good and we would also note that we think that, that market continues to look good from an issuance point of view. I will let Michel talk little bit about what we’re seeing potentially in terms of new mandates and some other things.

In terms of new mandate I think we've seen a bit of slowdown in the first quarter, we see that as a really something that is cyclical essentially there is overall level of growth in Europe is still very much subdued, there is continued to be some covered deleveraging. So against that obviously we've very low rate environment and we have a banking system that continues to struggle somehow. So although we’re very satisfied with the volume we've seen in first quarter, a bank loan we see a similar contraction to the one we've seen in the U.S., but overall I think we continue to see the structural trend in our favor in Europe basically unchanged.

Next we'll move on to Denny Galindo with Morgan Stanley.

Can you talk little bit about the share repurchases, you bought back on an aggressive pace this quarter, you paid a good price. I know you use a grid to figure out exactly how much to buy, at what prices, but can you talk about the metrics that would cause buybacks to go up and down in the quarter. And does in fact that you bought more shares this quarter have any bearing on how much you might buy in Q2?

We do use a grid Denny as you point out, but the details around that and exactly the pace at which we’re going to be buying under that grid as well as opportunistically outside that grid is not something we would want to telegraph.

Denny our guidance has been around the $1 billion for this year, and pace was a little heavier in the first quarter. We are pleased with the price that we achieved in the first quarter $95.20 per share stock crossed $110 briefly this morning. So we’re pretty happy with that. And we'll have to see as we always say the total amount of buybacks is subject to a lot of different factors and the pacing is something as Ray said that and actual grid prices are not something that we disclose.

And then moving on to PPIF group within MIS, it sounded like that was pretty strong. And it's sometimes hard to get good information on that space. Do you expect public financing to kind of remain fairly strong over the next few quarters and what types of issuers are really driving that strength there?

The real strength in the first quarter was coming from the U.S. municipal sector of PPIF, and that municipality is taking advantage of couple of things, obviously low rate and attractive borrowing conditions but also the fact that a lot of the volume from the mid-2000 is coming off of lock up and is able to be refinanced is a driver as well. We do think we’re going to see a good year for PPIF for the full year, but realistically the pace that we saw in the first quarter I don't think that’s a central scenario.

And then just one more longer-term question, longer-term and structured we're starting to see some innovation in the stacker deals from GSE or securitizing single family rentals, both kind of ways to bring private money and to financing single family homes. Could you talk about these deals or any other areas of structures which could boost the growth rate in structured products or in that RMBS bucket specifically?

Sure, I'll make couple of comments and Michel or Linda may wish to make remarks as well. Certainly innovation has always been a future of the securitization market as you said some of the new products that we’re seeing is bringing private money into portions of that market. Also changes in regulation are going to have an impact on that market going forward and would undoubtedly drive further innovation. Whether it's the rules or 2016 that are impacting the CLO market and how the market adjusts to that, the leverage limits that are being put on banks the activities in the banking sector that’s being tailed that may move capital raising and liquidity raising into the structure sector should all be characteristics of this market going forward. Really though for the shorter term looking out over the next couple of quarters I think we will be looking for the upside coming from existing products and from a resumption of securitization activity at more robust levels coming out of Europe. Michel I don’t know if you want to add anything to that.

Maybe if I may, just one comment on single family rental, it's a sector where we've been active but just in terms of number of transaction that remains fairly small sector. Although again we've seen innovation with new structures with multiple originated deals and so that’s a sector where we have presence, yes.

Denny I think you may will double check this but I think you may have confused one concept. Stacker deals are deals that come out of the existing portfolios there is a similar type between Fannie and Freddie. So that is to move from the government balance sheet into the capital market. That’s not really a new product and it has nothing, zero to do with private capital, that’s moving balance sheet exposure for the U.S. government into the private market, not new private market origination. So you might want to just think about that little bit. We are not super excited about the innovation in the RMBS market at this point, there are some of those products including single-family rental but these things are few and far between and what we’re really looking for is a resumption of the jumbo mortgage market, the private label jumbo market, but U.S. government is still backing the vast majority of mortgages in the U.S. So still rather limited private capital participation at this moment.

And we'll move on to Joseph Foresi with Janney. Please go ahead.

I wondered if we could talk first about just trajectory of the margins in the analytics business. I know it's been an area where you are trying to scale up on the software side in this quarter might have been affected by some one-time changes. But can we just maybe, could you give us a little color on sort of what you think that might look like through the back half of the year?

Mark would you like to comment on that?

I will comment on what we’re doing with the margins generally, but as you observed and as Linda explained earlier we had some changes that we made in the Copal Amba business and some integration costs that we were dealing with there. If you exclude Copal Amba from Moody's analytics the margin for the rest of the Moody's analytics business actually went up in the quarter, and that’s even taking into account the drag we had from the two acquisitions that we made. So we did that margin expansion on that basis in the quarter that’s the third consecutive quarter of margin expansion in MA. So I think it's consistent with what we have been talking about and the efforts we've been making to drive margin in MA, that continues to be a focus we think it's achievable but as we've described before, we expect this to be a very long-term effort and something that is going to occur in a meaningful way over a number of years and not something that you are going to see a dramatic change in over the next couple of quarters.

Should we think of that as a small creep, I think what that implies and fortunately our models sometime, we extrapolate some of the historical and just kind of run it through going forward. So is that a small creep year-over-year or do you think that momentum in each quarter obviously excluding the one-times carriers through the back half of the year?

Well again, what I am describing was modest increase in the MA margin ignoring the Copal Amba business in light of the changes that we were making over there. So I think given that we don't really guide to margins for the business. I think that’s pretty much all we can say there.

And there will continue to be some noise on a quarterly basis just based on the mix of activity that we’re seeing there.

And then just a larger question on issuance side for a number of years people have been talking about the amount of corporate debt out there, and I think starting next year and heading into the back half of that year and going forward that’s all going to come due. Do you have any sense of sort of how that plays from an interest rate perspective and then mixes it to the issuance market?

We've talked before about the refinancing walls that we can see on the horizon. This is particularly pronounced in the U.S. and particularly in the spec grade area. So beginning in 2016 but then really more of a 2017 and 2018 story we are going to see substantial refinancing needs in the corporate sector. That’s true also in Europe and in Asia, albeit to a lesser degree than what we see in the U.S. And I'm not anticipating a dramatic increase in interest rates over this period certainly at the longer-end. So I think even though I keep saying this and I keep being wrong even though I would expect rates to increase on a going forward basis, I don't expect that to be the kind of increase that would make absolute financing terms unattractive.

And then last one for me, any comments you have, I know you said you really didn't have any on the regulatory changes. Any comments or updates there?

No, nothing really new to report on the legal regulatory side, we'll be filing our Q very shortly but again nothing notable that I would point you to as of right now.

From FBR we have Bill Bird. Please go ahead sir.

Ray I was wondering if you can talk about you know what you are seeing right now in the reverse Yankee market? Are you seeing that pipeline build, do you anticipate more companies following your lead and tapping this market?

Sure Bill, I am actually going to hand this over to Michel and let him offer his thoughts on this.

Well I think this is really a matter of two factors, one, the currency play and two, the rate differential that exist between, and the spread differential between the U.S. and European markets and I think on both of these fronts I think we continue to expect to see favorable factors for such a trend. So we don’t have a number to offer here but I think the conditions that have been favorable to date I expect it to remain in place at least for the foreseeable future for the short-term, medium term.

And Bill let me just add something we show in terms of our revenue performance the revenues based on the location of the issuer rather than the market into which it is issued. So think about that in the context of our U.S. versus European corporate revenues.

Linda could you also give us the incentive comp accruals for the quarter year-over-year?

Sure Bill, just a second, while we look that up. For the first quarter of 2015 the incentive comp accrual was about $38 million and that's up from last year's $29.5 million and we're running about on target with where we expect it to be at this point in the year, that number is one that obviously bounces around if we're doing worse that's number is smaller if find ourselves doing better, of course that number would become a bit heavier but 38 million for the first quarter.

Just one final question, your more moderate growth outlook for structured and financial institutions, is that just currency or is this something else?

That's really currency. As a matter of fact most of the outlook story the change is related to currency.

Next we have Bill Warmington with Wells Fargo.

So I wanted to start up by asking about the very strong muni issuance up 37%, just wanted to see if you could talk a little bit about the conditions that have produced that and thoughts on the pipeline there going forward for the rest of 2015?

The 37% growth is really driven again by the U.S. municipal market which had a very strong quarter. We expect that the US market is going to continue to be strong through the year, although not at first quarter levels as I think I mentioned earlier and again it's a combination of refinancing with the opportunity to do so in an attractive rate environment and the expiration of lock up periods for some of the municipal bonds.

I noticed the MIS relationship revenue growth about 3.7% just seem particularly low and I wanted to ask how much of that’s being distorted by FX and if there's anything else going on there that would explain that?

No it is again an FX story I know this starts to sound like a broken record but we have reasonably large recurring revenues coming out of Europe a lot of frequent issuer pricing arrangements and the monitoring fees and they go along with that, we’re seeing growth but it's, that growth is really being impacted by the decline of the euro.

And then one last question for you on the research data analytics there. Just wanted to ask about how price increases were trending so far in 2015 what your expectations are going to be there for the year?

They are running pretty much in line with the way they were through 2014, so we continue to get a nice kick from pricing we anticipate that continuing.

Next we have Peter Appert with Pipe Jaffray.

So Ray your market share performance relative to peers has been really strong certainly in the first quarter, I think even for the last several years. Can you call out anything in terms of what you see driving that performance or any particular categories where you think you are picking up share?

Yes our coverage has been strong and obviously we are -- we would attribute that to a combination of the work we’re doing on our analytics and the demand that that is creating from the institutional investor community for issuers to get Moody's ratings, beyond that I think it's really a matter of operational execution and we’re paying a lot of attention to executing well. Nothing fancy about that.

No particular asset class, where you think -- I was thinking about for example in CMBS one of your competitors has had some issues, maybe that’s helping you?

Ironically not really in that area, and you are correct the structured finance area in particular shows some coverage volatility it always has rating shopping is more prevalent there. But the area where we’re strong in the commercial mortgage backed securities area in terms of multifamily or multi-property deals we've been strong in even before there were -- where there was a moratorium on the ratings from one of our competitors. And so the strength continues but it hasn't really changed in terms of the mix we’re picking up because of external events.

And then just one other thing, feels like maybe the banks in Europe are getting a little bit healthier at least there seem to be just scraping by on their version of the stress test. Wondering if you think that has any implications in terms of this whole disintermediation thesis in terms of there is just the competitive pressure from banks being able to better serve lending requirements.

I guess the short answer Peter is, no I don't think so. The demand on financial institutions globally in terms of meeting stress test, capital requirements, liquidity requirements the businesses that they have been curtailed from are all continuing to put pressure on profitability, willingness to make loans, and I think also are increasing the awareness from corporations and municipal entities that they need access to multiple forms of liquidity in capital. So the bond market is not a substitution for bank relationships and alternative and an addition to the banking relationships.

So 2% to 3% is still the right number in terms of incremental revenue from disintermediation or you think maybe even better than that?

I think that’s probably a fair number, it's going to vary quarter-to-quarter cyclically but structurally I think that’s very much intact.

And we will take Craig Huber with Huber Research Partners.

Yes I got few questions. Linda if I could ask you just to break down the revenues by your four segments high yield versus bank loans for the three sectors to start up please?

Sure Craig, we’re looking at the first quarter of 2015 over 2014, so investment grades at $87 million is running at 29% of the almost $300 million we saw in CFG for the first quarter that 29% is up from last year's 18%. So as we said investment grades been running hot and strong and the jumbo deals are really terrific. Spec grade is about $63 million up from last year's $53 million percentages are about the same 21% versus 20%. Bank loans are down both absolutely and in percentage terms about $45 million versus last year's $67 million 15% of the total growth of last year's 25. And other is at $104 million which is up from last year's 97, but on the percentage terms down to 35 versus last year's 37. So big change there is the increase in percentage from investment grade, spec rates bonds and percentage terms up a little bit, bank loans down very important for everyone to note we can do okay with the change mix and we’re doing pretty well just like the fact that the investment grade piece was stronger than first quarter. Now looking at structured, first quarter 2015 versus 2014. Looking at asset backed securities absolute numbers about 21 million about flat from last year's 23 percentages it's 21% of the total for structured of $101 million down from last year's 24. Residential mortgage backed securities which does include covered bonds about 18 million flat from last year's 18 million percentage wise down to 18% versus last year's 19. Commercial real-estate up $33 million from last year's 29 in percentage terms it's also up to 33% versus last year's 31. Structured credit which is primarily CLOs up to about $29 million from last year's 25 percentagewise up to about 28% versus last year's 26. Then FIG first quarter 2015 versus 2014 $94 million in revenue versus last year's 85 million. Banking about 63 million up from last year's 57, that stays flat at about 67% of the percentage total. Insurance at about 25 million versus last year's 21.5 million is up to 27% from last year's 25%. Managed investments 3.5 million versus last year's 6.6 million is down, that’s 4% of FIGs total versus last year's 7%, and others about 2%. And then lastly PPIF total was 100 million versus last year's 80 that’s a big jump, PFG and sovereign up absolutely to $56 million from last year's 41, up in percentage terms 56% versus last year's 51. Project and infrastructure also up about $45 million from last year's 40, percentagewise down to 44% from last year's 49, and that’s the total for a PPIF. So that’s the whole view on the ratings business. We do have the MIS other line which is something kind of newish Craig and that includes KIS and ICRA so that’s up a little bit from last year because of the ICRA consolidation, $7.8 million dollars versus last year's 3.3 and of course the ICRA percentage at 56% of the total is higher because we didn't have that view as of last year.

And sorry just for clarification the MIS other is ICRA's non-ratings businesses. The ratings agency has its revenues rolled up into the lines of business that we have for MIS already.

Like to ask a simpler question. On the currency side Linda I think last quarter you had about 100 basis points spread between the impact on revenues versus your cost. I believe you said that the second quarter impact 4% to 5% for reach. Is just rounding or you really are thinking almost top each other this quarter?

It's rounding Craig, this is pretty hard for us to forecast. So what we’re looking at is it's a negative 4% to 5% in revenue, it's positive 4% to 5% in operating expenses, as we talked about before our main exposure of the euro and the British pound at the end of the first quarter the pound was at $1.48 and the euro was at a $1.07 and we had run this year with the euro at a $1.15 with what we've had in our forecast, now a very happy phenomenon for me as the CFO is the euro this morning is at a $0.12. So we’re coming back in the right direction. And Ray and I talk about the euro every day. So what that will boils down to is if you were to see euro to further weaken we would $0.05 decline in the euro would cost us another 20 million in revenue but help us 4 million on the expense side. So the net would be down $16 million or about $0.05 on EPS. So this is actually pretty simple. The short hand we use is if the falls another $0.05 versus the dollar it will hit is $0.05 and EPS which is a pretty simple metric for you to use.

I guess I'm also asking Linda the 7% hit as you guys calculated when you're operating profit line in the first quarter from currency, are you expecting a similar type hit here on the profit line on currency?

It could be Craig it depends what happens going forward as I said we’re slightly cheered by the fact that the euro is up a little bit but this is bouncing around far too much for us to put a tight range around this. And as you saw we help guidance and we don't like to move guidance after the first quarter that would be a correct observation, but this currency piece makes it a little bit harder to know where we’re going to go. So we’re going to have to just watch it. The euro could continue to strengthen or it could weaken from here and those two situations don't look the same and that’s why we’re being a little bit thoughtful and we'll see where we get to as the year goes on.

Lastly Linda is there anything else beside your incentive compensation you would call out, on that variable cost side to help offset the potential weakness at some point down the road on the revenue side, anything else of significance.

I think we will Craig we always have our 50 million in an expense flexibility if things really got difficult we can slow down on things and certainly slowing hiring would be the first thing, but I always want to put some perspective on this because Moody's is a growth company and you need to think about us that way. We're looking at 72% of the S&P 500 have reported so far. And sales growth for the S&P 500 all in is minus 4.1%. And if you take out the energy companies if you want to make that argument the growth is up 2%. We just put up 13% growth and 18% on a constant currency basis. So in order to do that we’re spending some money but as you know our shareholders have been telling us if we can get growth we should do that, and I think we've demonstrated pretty effectively we’re able to do that despite some pretty hefty currency headwinds. We think we've had a pretty good quarter.

[Operator Instructions]. We will continue with Tim McHugh with William Blair & Company.

Most of my questions have been asked but I have two quick ones. I guess Copal you said that $89 million hit from shutting down products, I guess since there is different pieces in there with the certification business. I just wanted to circle back to another question. What's the underlying trend? Are they seeing still good growth, good demand if you adjusted for that? Is it possible to strip that out and look at how it's performing without that change?

I'll comment a little bit and then Mark may want to comment. I guess we've had the confluence of two frustrating events in the professional services line, and I'm managing the Copal Amba business, Mark is managing the rest of professional services which includes CSI but the two really have nothing to do with each other, other than that they're reported up for the same line in Moody's Analytics. I did mention the product line that we decided to reduce in scope Copal Amba, but we very much like the trends and the outlook for Copal Amba. I think I have mentioned before it has generally Moody's like growth rates and close to Moody's like margins and right now as banks are looking to reduce costs being able to offshore knowledge processes is growing at a pretty terrific rate and we’re very pleased with what we’re seeing at Copal Amba, we were just out in India last week a group of us and we’re very pleased with the opportunity that, that business presents. So just a little bit of a lapping problem and I don't know if Mark has anything more to add about CSI than what he is already said. Mark?

I would just add that in training and certification ignoring the currency impact which is quite substantial. Let's say the underlying business is okay, it's not growing as well as the rest of Moody's analytics, so its low trend in that respect but it's alright.

And then Mark I guess ERS, I don't know if I missed it but I think in the past you have given kind of a trailing 12 months sales activity or sales growth rate. Can you give that? How does that…

I think Linda did mention it, trailing 12 months sales is 24% growth.

Does that include WebEquity or is that organic?

That includes WebEquity as well.

Which would be a small piece.

Yes, it's a small piece, couple of points.

We will take Vincent Hung with Autonomous.

I just want to pull you back on the question on market share from before. I am really curious as to your strong growth in MIS, so it's up 12% excluding ICRA versus 6% at S&P. And I think one of the sources of dispersion is your non-U.S. results where you saw good year-over-year increase even if you exclude MIS on that. And S&P saw a year-over-year decline. And can you give us some color on the non-U.S. trends you saw this quarter?

I can talk about Moody's; I don't really know anything more than you do about how other firms got to their performance levels in the first quarter. We have talked about the Moody's story pretty extensively here. So Vincent I actually don't have a lot to add to that, I apologize.

And then last question. Do you think it would be harsh to say that leverage lending is structurally impaired?

I think that banks have got to work through an evolving regulatory and profitability environment that is going to have an impact on lending. It's also going to continue the disintermediation trend that we've been seeing. And so I think that’s structural as well.

Vincent its Linda I am going to read you from the Fed's press release on this topic form November 7th. It says the annual shared national credits review with them, that the volume of criticized assets remained elevated to 340.8 billion or 10.1% of total commitments which is approximately double pre crisis level. So let's assume that the banks are listening on that Fed on that front. And perhaps they are tamping down leverage lending in this higher risk category because they have got to hold more capital against these loans as we said even if they put them into CLOs later. So it's pretty important that that situation be understood. And I would urge you to take a look at what the Fed is saying and also the research we have written on this topic.

We have Doug Arthur with Huber Research. Please go ahead.

One quick question. Linda can you just clarify I think you threw out a figure of 35 million as I believe you are referring to the quarterly trend in clause Q1 to Q4. Can you just clarify that figure is, is that revised given the so much heavier Q1 clause or there no change?

First of all congratulations Doug on your joining Huber Research. And the number of the mid case the base case we’re looking at now is $30 million of expense ramp, and our first quarter expenses were 494, I think on an earlier call we had said maybe 500 for the first quarter. And I think we have had a steeper ramp originally that might have even been $40 million to $50 million. So we’re kind of backing off on that. Again I would caveat, this is probably the number I dislike giving the most because it can vary based on whole bunch of different things and this is cutting it pretty finally to get that midpoint of $30 million of expense ramp Q1 to Q4, but that’s our best guess as of right now.

And we'll move on to Patrick O'Shaughnessy with Raymond James. Patrick O'Shaughnessy: First question is with the reverse Yankees, I appreciate you saying that you book U.S. revenue but how are you charging for reverse Yankees? Are you actually generating revenues in euro on that, and having those translate back to dollars?

If these are U.S. issuers, U.S. domicile companies we would be charging those in dollars. Patrick O'Shaughnessy: And then a follow-up. S&P or McGraw-Hill in their call talked about how the dollar issuance environment was very strong but the breadth of issuance was not very good and so that going to have ramifications on their growth. And certainly that doesn't seem to be something that you guys talked about or showed up in your results. So can you just maybe talk about, do you tend to have a preference for a lot of smaller deals versus a few bigger deals. And what’s recent environment looked like in that regard?

When we look at volume and we look at count, obviously we’re pleased when both are up. But because of the way the pricing is structured I would say as a general rule seeing more smaller issuers a higher count would make more of a difference than higher dollar volume.

At this time this concludes Moody's first quarter 2015 earnings call. As a reminder, a replay of this call will be available after 03:30 PM Eastern Time on Moody's IR Web site. Thank you.