Operator: Your next question comes from the line of Jeff Silber from BMO Capital Markets.
Jeff Silber : In your prepared remarks, you talked a little bit about some of the indicators you’re seeing to give you confidence about a global debt issuance rebound in the second half of the year. Can we get some examples of what you’re looking for, what we should be looking for?
Rob Fauber : Yes. It’s Rob. So maybe let me talk about both what I think could provide some upside as well as also what could provide some headwind to our outlook. So I’ll start with the upside. We talked a lot about, on the last call, just the market’s need to get more certainty around the trajectory of inflation and getting certainty that inflation was starting to peak because that then informs the Federal Reserve actions and the market wanting to understand whether we’re near the end of the tightening cycle. And you can see, as we then went through the fourth quarter end of the year and into January, the market getting some confidence and you see the issuance that started. We also talked about where you’re going to see that.
And so I think that’s interesting to understand. You’re first going to see, as the markets open up, opportunistic investment-grade issuance. There’s the folks with the best access to the market. Then you’re going to see, and we have started to see, the higher-rated spec grid names coming to the market so the B, A names. And then eventually, you start to see the single B names coming to the market, and we have seen a few of those. In fact, we’ve seen our first couple of dividend recaps in months. And it’s that kind of activity that starts to give you confidence that the market is opening up. Now I would say it’s — I’m going to use the word kind of a fragile recovery because there’s still plenty of headline and event risk. But we are starting to see that.
You saw a very robust month in January for investment grade. You saw high yield start to pick up in leverage loans, started quite slowly, but we’re starting to see some leverage loan activity as well. M&A, we have a fairly muted forecast for M&A, kind of a flattish assumption built into our outlook. That could provide some upside if we see M&A activity pick up. And I would look to the sponsor-backed M&A and LBO activity as a place where the sponsors have a lot of dry powder to put to work. And so that would be something to look for. Just quickly in terms of what could the derailers or the headwinds be — yes, sure.
Jeff Silber : Sorry. No. You broke up there. Sorry about that.
Rob Fauber : No, sorry. Just in terms of — just very quickly, Jeff, what could provide a few headwinds? There is, as I said, a headline risk, both in terms of inflation prints and what that means for what the Fed is going to do. But — and just in general, any unanticipated policy actions by central banks. And that’s something I’d talked about even last year. The central banks have a pretty tough assignment on their hands to both deal with inflation and engineer a soft landing. So I think we’re going to be keeping a close eye on all that.
Operator: Your next question comes from the line of George Tong from Goldman Sachs.
George Tong : You expect 2023 MIS revenue to increase low to mid-single digits, and that’s based on an assumption of low single-digit growth in global debt issuance volumes. If you assume pricing growth of perhaps 4% to 5% given higher inflation, the guide implies to the degree of negative mix from issuance. That said, it looks like you’re expecting high yield and structured issuance to be the fastest-growing categories in 2023. And these are generally favorable from a pricing mix perspective. So can you help bridge your assumptions for MIS revenue growth and global debt issuance volume growth in 2023?
Rob Fauber : George, I think you’ve got it about right. I mean, that’s why we’ve got a range that we’ve included there for our outlook. And maybe let me just — it might be helpful, George, just to touch on, for a moment, how we’re thinking about 2023 issuance outlook. And there are a wide range I think, of views, probably a wider range than I can remember in recent memory around what’s going to happen with outlook. And as you start to zero-in on what’s accounting for the difference, it really, I think, is largely around folks’ expectation around leverage finance issuance. And I’ll start with investment-grade. I mean, we expect that to grow modestly something like 5% for the year. Leveraged finance, when we look at high yield, we’re expecting growth of 25%.
Last year is one of the slowest years on record. And I would acknowledge that we’ve got a little bit more cautious view than some folks in the market. I’ve seen some much more bullish forecasts for high-yield issuance. But in general, I think what is informing kind of our view is we’ve got an environment with higher funding costs. We’ve got the potential for a recession, and we’ve got a flattish M&A outlook. And so that’s what’s contributing to our view. I would acknowledge, George, that we’ve got a pretty healthy backlog of first-time mandates that did not go to market last year. Almost all of those are in the leveraged finance space, so there’s some definite pent-up demand. And then leveraged loans, we think it’s going to be flattish. And again, back to kind of Mark’s commentary, kind of a tale of two halves.
Loans had a very strong start to 2023 but — so we expect that, that will pick up in the back half of the year — for 2022, excuse me.
Operator: Your next question comes from the line of Jeff Meuler from Baird.
Jeff Meuler : Rob, you hit on some of this when talking about M&A — or MA more broadly, but I want to focus on Decision Solutions in Q4 specifically. It pretty significantly accelerated. And correct me if I’m wrong, but I thought RMS was in there, and you noted that’s currently growing more slowly organically than, I guess, your heritage solutions. So just anything further you can say on what drove the organic acceleration in Decision Solutions in Q4 specifically? And is it underlying or is there anything unusual like one-timers like rev rec true-ups for full year usage or anything like that?
