Moelis and Company 2Q15 Earnings Call Notes

Paying dividends

“we looked at our cash flows and we’re very comfortable with this dividend. We think there’s substantial excess capital. We had no debt on our balance sheet, and we’re very comfortable. I think as we’ve experienced being a public company for a year and a quarter, we’ve gotten more and more comfortable and feel like we want to have a stronger dividend. Look, we do hope to grow the dividend. I think we’ve come to the conclusion that we did a $1 special dividend last year. We think it’d be better to continue to put those into regular dividends, return them — showing the strength of the franchise. ”

Are bulge brackets increasing share?

“I do think in some of the big cap transactions there is a need for large amounts of cash, credit, maybe some more capital markets in those types of transaction and maybe that’s the reason, but look I still feel like the trend toward independent advisors and the trend toward talent wanting to go to those independent advisors is in place ”

Strategic buyers have better options this cycle than financial buyers

“strategies have better currency in this cycle right now that outbids, so if you have an asset and it’s moving in a strategic, has an interest, they often have a better currency to use. ”

I don’t know why the restructuring market will pick up, but I know it will

“I would look at the default rate, that’s a general reason why they’re slowing down and there’s certain sectors where you’re starting to see some volatility and that could help, but in general, very low interest rates, kind of a decent economy, I think is — I don’t see a short term reason why that market would pick up, but I know from being alive in Wall Street for 35 years, it will. I just don’t know when.”

Strategics can pay a higher price than financial sponsors

“I still think that, there’s a price at which the finance sponsors kind of don’t go. They don’t want to pay and the strategics can, so there’s still going to be — it’s a good strategic market.”

Regulators stepped put a clamp on the market for financial transactions, but people are learning how to deal with that now

“What happened in the first quarter and earlier this year was processes and transactions in development were stopped or changed by regulatory changes in the way they were going to access financing…Now, what I sense is happening now and we see it in our processes, people learn. They are now planning. They understand the regulatory environment. Banks are forewarning them when they might have an issue. People know the leverage limits and they are structuring — we’re structuring the process”

We were surprised at how much capital went into energy in the first quarter

“we were I think surprised as — probably shouldn’t have been but the world was how much capital in the first quarter marshalled itself to go into energy and so really, stayed off default.”

You had a combination of capital and hedges protecting oil companies from taking pain

“you have two things, an enormous amount of capital was just marshalled to put it in, and secondly there were a lot of hedges that extend for at least, till June 30th natural operating hedges that people didn’t have to take the pain yet of the downturn, the full downturn in oil prices. So, I think that will over time, start to creep up on people.”