Fly Leasing Limited (FLY)

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Fly Leasing Limited (FLY)

Q2 2011 Earnings Call

August 4, 2011, 9:00 a.m. ET

Executives

Matt Dallas – IR

Colm Barrington – CEO

Steve Zissis – President and CEO of BBAM

Gary Dales – CFO

Analysts

Sameer Gokhal– KBW

Helane Becker – Dahlman Rose

John Evans – Edmunds White

Presentation

Operator

Good morning. My name is Heather, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fly Leasing second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Matt Dallas, you may begin your conference.

Matt Dallas

Thank you, and good morning, everyone. I am Matt Dallas, the Investor Relations Manager of Fly Leasing and I'd like to welcome everyone to our second quarter earnings conference call. Fly Leasing, which we will refer to as FLY or the Company throughout this call, issued its second quarter earnings results press release earlier today, which is posted on the Company's website at flyleasing.com.

On this call today, we will also discuss the recently-announced acquisition of a portfolio of 49 aircraft. A FLY presentation accompanies today’s call, and is available on our webcast. You can also find a link to the webcast, and a copy of the presentation, in the events page – on the events page in the Investor section of our website.

Representing the company today on this call will be Colm Barrington, our Chief Executive Officer, Gary Dales, our Chief Financial Officer and Steve Zissis, the President and CEO of BBAM the company that manages and services FLY’s fleet.

I’d like to begin the call by reading the following Safe Harbor statement. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to statements regarding the outlook for the Company's future business and financial performance.

Forward-looking statements are based on current expectations and assumptions of FLY's management, which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to factors that are summarized in the earnings press release and are described more fully in the Company's filings with the SEC. Please refer to these sources for additional information. FLY expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.

This call is the property of FLY and cannot be distributed or broadcast in any form without the expressed written consent of the Company. A replay of this call is available for two weeks from today. An archived webcast of this call will be available for one year on the Company's Web site.

I would now like hand the call over to Colm Barrington, the CEO of FLY Leasing.

Steve Zissis

Thank you, Matt, good morning everyone, and thank you all for joining us. We are delighted today to talk to you today about FLYs agreement to acquire 49 leased aircraft that are currently managed by Global Aviation Asset management, and Australian company.

First we will have a short slide presentation explaining this transaction and it’s rationale, then we turn to slide second quarter earnings release, and finally we will wrap with the Q&A session.

We’ve entered into a [inaudible] agreement to acquire 49 modern and fuel-efficient aircraft and the transaction value is approximately $1.4 billion. 40 of the 49 aircraft are Boeing 737 Next Generation, and Airbus A-320 family aircraft.

This transaction will be accreative to GAAP earnings and will generated positive free cash after-debt service. The company don’t have raise any new equity. The transactions will have a particularly positive impact on our EPS.

The aircraft in the new portfolio, our leased 23 airlines in 15 countries, and the lessees include many well-known airlines, including Air France, British Airways, Finnair, [inaudible], Iberia, Qantas, Ryanair, South African Airways, and Virgin Atlantic.

As a result, the credit profile of the portfolio is particularly strong. The acquisition has 19 new high quality credits, to fly lessee based. All air – 49 aircraft are on lease today.

The portfolio comes with approximately $1.24 billion of secured non-recourse debt from five lenders. Much of this debt was put in place prior to the credit crisis, and as a result, is on relatively attractive terms. The weighted average interest rate of the debt is approximately 6%.

Notwithstanding the relatively high leverage, it is important to note that upon closing, there’ll be no material near-term debt maturities that will need to be refinanced. The recent financing package in place, on the portfolio, is relatively long term and it’s major.

Approximately $145 million of the 1.4 billion purchase price, including transaction expenses, will come from FLY’s unrestricted cash. As a result, we do not have to raise any new equity or debt to complete this transaction or to meet near-term lease financing obligation.

We’re aiming to close the transaction in the fourth quarter, after a fleet of lend consents, and other customary closing requirements.

I would now like to describe the rationale behind the transaction, and explain how its completion demonstrates some of FLYs strength. As you can see, we are really excited about it. First the acquisition of this portfolio fulfilled FLYs stated goals of growing it’s fleet strategically. Over the last few years, we’ve deployed capital towards debt and share repurchases, and completed several such transactions that have added significantly to shareholder value.

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