Thank you very much. Good day, everyone. Welcome to our 2012 First Quarter Results Conference Call. With me today are Aengus Kelly, AerCap CEO; and Keith Helming, AerCap CFO. In today's call, we will discuss the first quarter earnings. In addition to this earnings call, AerCap will host a lunch for analysts and investors today at the New York Palace. The launch will not be webcast, but the copy of the presentation will be available on our website. Before we begin, I want to remind you that some statements made during this conference call that are not historical facts may be forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. In addition, this conference call contains time sensitive information that reflects management's best judgment only as of the date of the live call. AerCap does not undertake any ongoing obligation, other than that imposed by law, to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise after this call. Further information concerning issues that could materially affect performance related to forward-looking statements can be found in AerCap's earnings release dated May 8, 2012. A copy of the earnings release and conference call presentation are available on our website at aercap.com. This call is open to the public and is being webcast simultaneously at aercap.com and will be archived for replay. I'll now turn the call over to Aengus Kelly.

Thank you, Peter. Good morning to everyone in the United States and good afternoon to those of you in the Middle East and Europe. Thank you for joining us today for our first quarter 2012 Earnings Call. The consistency with which AerCap is delivering industry-leading results earned us an investment-grade corporate waiting from Standard & Poor's and Fitch in the first quarter. We are proud to be the very first independent lessor to have ever achieved an investment-grade rating. We obtained the investment-grade ratings due to the success of our leasing strategy, the excellence of our platform, the quality of our aircraft portfolio, and the efficiency and robustness of our funding structures. While AerCap has always had industry-leading access to funding, our new credit ratings mean that any additional funding capacity we may need to take advantage of market opportunities can be obtained on very favorable terms. Turning to the results. During the first quarter of 2012 AerCap achieved an adjusted net income of $69 million or $0.49 per share. On a non-adjusted basis, including non-cash mark to market charges and share-based compensation, we generated a very healthy net profit of $65 million or $0.46 per share. Total assets were $9.3 billion at March 31, 2012, a year-on-year decrease of 5% following the prudent sale of AeroTurbine and the sale of a 50% interest in a joint venture. We are committed to purchasing $986 million worth of aircraft in 2012. In the first quarter, we completed $258 million worth of these purchases. During the first quarter, we also signed new lease agreements for 9 aircraft, 4 of which were delivered to American Airlines as part of our purchase leaseback transaction. The American deal remains highly attractive to AerCap as it enables us to profitably grow our portfolio with the most…

Thanks, Gus. Good morning, everyone. I'll take you through the first quarter 2012 presentation now. I'll start on Page 4. Our reported net income for first quarter 2012 was $65 million. Additionally, our adjusted net income was $69.1 million. Both reported and adjusted net income are down slightly from the same period in 2011. This decrease is a result of the timing of revenues and expenses relating to defaults in restructurings. In the first quarter of 2011, we incurred some defaults where we held large reserve balances and these amounts were recorded as income at the time the leases were terminated. Any costs which related to these defaults were incurred in subsequent quarters. In first quarter 2012, we incurred costs relating to defaults which happened in late 2011, as well as 2012. Excluding these timing-related items, first quarter 2012 net income was $75.8 million, which is up 12% over the comparable amount in first quarter 2011. On Page 5, reported earnings per share were $0.46 in the first quarter 2012 and adjusted earnings per share was $0.49 during the same period. The average shares outstanding now is at $139.9 million. On Page 6, revenue. Total revenue in first quarter 2012 was $258 million, this is down from $264 million in first quarter 2011. The decrease was driven by small reductions in both basic lease rents and maintenance rents. On Page 7, net interest margin. Our net spread was $174 million in the first quarter 2012. The annualized margin as a percent to average lease assets was 8.85%. On Page 8, the impact from sales for first quarter 2012 was a slight loss of $200,000. We sold 2 aircraft in the first quarter, a new A330 and one older 757. We incurred a gain on the sale of the A330, which…

Thanks, Keith. So in conclusion, our disciplined growth strategy and robust capital structure continue to produce industry leading profits and a best-in-class credit profile. I'll now hand the call back over to the operator for the Q&A session.

[Operator Instructions] Our first question comes from Helane Becker from Dahlman Rose.

So my one question has to do with other aircraft that might be at risk. Do you have any other exposure to any other airline companies that look like they're having operational or financial difficulties?

Helane, it's Gus here. At the moment, as I said, we have placed all our aircraft through 2012. We're not seeing any unusual activity on the receivables side. And what you've seen again here when we show you the impact of the various defaults we had last year is that the collateral that we had in place through security deposits and maintenance reserves offset the costs of transitioning those airplane. And as an example, with the Kingfisher, as I said, everything is in place and gone.

Okay. All right. That's really it. I think all my other questions are pretty self explanatory or you answered in the presentation.

Our next question comes from John Godyn from Morgan Stanley.

First, I just wanted to ask a little bit about the slide on the financial outlook. If I just kind of compare it to what you guys offered last quarter, it looks like that you sort of firmed up the tax rate and the debt issuance, I'm sorry, and the interest expense as well, and they both went up a little bit but you maintain your ROE guidance for 2012 at 10%. Is there something offsetting that or am I reading too much in the fact that you guys kind of firmed up the interest expense and tax rate guidance?

Yes. I mean, the numbers that we're showing now, which are more specific, are pretty close actually to the estimates that we had the last time around. We're just being a little more specific here as we're further, obviously, into the year. So the range that we showed previously, the numbers were a little bit on the higher side, so we're just giving you the specific numbers now. So the ROEs should be around the 10% level we discussed last time.

Okay, that's helpful. And I was hoping that you guys could sort of speak to just your general outlook on lease rates across key aircraft types here. We've heard from some of the other lessors that, of course, there has been some softness but just recently signs of stabilization and possible optimism as we look into the back half of the year. Do you generally agree with that? If you can just sort of give us some color, it would be helpful.

Yes, we certainly do. I mean, if you look at the most popular narrowbody in the world, the 800, that's been extremely firm, the most popular widebody in the world, the 330, we keep getting requests for 330, 300s in particular from carriers in Asia where these aircraft, these small widebodies are actually turning into narrowbodies in terms of their user base and on the 320 side, as well. For new 320s, we don't see any difficulty moving them and I guess, the best evidence I can give you is that all of our aircraft in 2012 are placed -- the aircraft we had to take back from Kingfisher, A320s moved quickly, we had them placed within weeks. So I think that's the strongest indication I can give you. Now of course if you go to the older stuff you know stuff like 767 or 747's, which we don't really have, then it's going to be a little bit different. But for the most popular airplanes in the world, the 737 family, the 330's and the 320's, things are looking pretty good.

If I could ask one more on buyback if you could just help us to think about how you think about buybacks here versus additional aircraft acquisitions and just for context, does the fact that you've recently got a credit rating create a period of time where a new buyback is unlikely or constrain you in any way on that front?

No, certainly, the credit-rating has no impact on our ability to do buybacks. The advantage of the credit rating is that AerCap will be the first lessor to do a real unsecure deal. As you're aware, many of the unsecured deals that have gone out to date aren't unsecured at all. The key covenant is that you have unencumbered assets before you can actually draw down the money so they just secured funding through the backdoor, it's the exact same thing. The unsecured funding that we can raise with the investment-grade rating is quite the opposite effect. It enables us to do more or less whatever we want with the funds, we do not have to have any unencumbered assets. So that's a key difference in how the debt works. Now as we think about share buybacks, as we said to you before, we're very disciplined about it. We have very strict underwriting standards when it comes to acquiring aircraft. And those aircraft that we acquire have to be accretive to shareholder value. The key benchmark you look at is what's the alternative use of funds, which is the buyback of shares. And that's why if you look at the last 9 months, what have we done? We had -- did a share buyback program for $100 million. We did the American Airlines transaction for the most attractive aircraft in the world. We've just signed an LOI for the 330s. We sold AeroTurbine. What you didn't see us do is buy a lot of airplanes off competitors, queue up for orders at the airshows, commit to very expensive PDPs. The way we deploy the capital of the shareholders is with, at all times, long-term shareholder value in mind.

Our next question comes from Arren Cyganovich from Evercore.

If you talk a little about the investment grade rating you received and how you view that helping your mix of funding going forward, should we expect a slug of unsecured debt or do you have any kind of target for the mix of funding with that rating?

Let me just say the first comment then hand it over to Keith. You know, the key is I don't believe that anybody has done an unsecured deal yet. That's the key point. And people call them unsecure but as I mentioned, if you raise $500 million of what's called senior unsecured, you actually have to have probably $700 million or $800 million of unencumbered assets before you can draw the funds down so it's just money to acquire the airplane to secure funding. What we're looking at is something entirely different, where this isn't secured funding at all. This isn't senior debt as it were in aircraft transaction. This is something that is more akin to quasi equity. And so that's the big differentiating factor and that would drive how we would use it. Keith, do you want to add to that?

Sure. I mean, the fact that we have an investment-grade rating now is not really going to change our fundamental approach to financing the company. I mean, secured debt has always been the source of financing for us. And as you can see, the cost of funding, including the cost to hedge that debt against rising interest rates, has been relatively low so that's still going to be a foundation for financing. But now with the investment-grade rating, we have access to the unsecured market. And again, as Gus mentioned, we have access to what we believe is true unsecured to a certain degree, there's a certain amount that we can issue without having any real restrictions on having unencumbered assets or having any real restrictions on buying back shares or other sort of unique payments. So that's likely a source of some additional capital for us. So again, now with the fact that we have a very strong cash balance and now the access to get another capital avenue, if you will, we're in an even stronger capital position than ever before.

That's helpful. And in terms of share repurchases, maybe not having any restrictions from the debt side, but I guess from the capital coming to your hands through American and also the new A330 that you're going to investing in in 2013, maybe you can touch on the timing and when you expect those. And did those new capital [indiscernible] have any impediment to doing any new share repurchases in your view over the near term?

The short answer to that is they do not impair our ability to do share repurchases. You will continued to see from us a disciplined approach to deploying capital. We have the resources to do another share buyback program or to acquire more aircraft, and the board is continually looking at both alternatives.

Our next question comes from Isaac Husseini from Barclays Capital.

Just a quick question on the aircraft acquisition guidance of $1 billion for 2012, it looks like you've been historically a bit conservative in 2010 and 2011 on that guidance. And I just wanted to -- I'm just wondering, basically, if you can give us any comment there on what you're seeing in the markets right now, just to help us understand whether there is any upside to that number, to that $1 billion guidance number.

Yes. Just in terms of the approach in the way we provide guidance to you, that number really -- it's just representing effectively what has been committed up to this point. So as Gus mentioned, we've added to those numbers, obviously, in the past, and we'll continue to look for opportunistic purchases that hopefully can increased that number. But again, what you're seeing there is really just the committed position as of right now.

And on the purchasing side, as I said to you, look, if you look back over the last almost 18, 24 months, the 2 transactions we did of any size are the American deal and this LOI for the 330, that shows you the discipline that we have in the business. We don't chase the market. You don't see us buying airplanes off competitors, giving them big gain. You don't see us in the weekly bake-offs for the sale lease backs or queuing up at the airshows. So you can -- everything we do on the aircraft acquisition side will be accretive to the shareholders. And what we are seeing in the market at the moment is that a lot of the new money that came in has been spent, non-investment-grade entities, particularly airlines, are still having issues raising capital. So it is providing opportunities. But those opportunities must meet our underwriting standards. It's got to be the right airplanes, it's got to be at the right price, and ideally, we don't want to have to get involved in very expensive and risky predelivery payments associated with that.

Okay, understood. And then understanding that obviously very optimistic about your acquisition and you're not interested in participating in bidding wars [indiscernible], what -- are you seeing any change in the interest level of airlines as it relates to sale leasebacks [indiscernible] from 6 months ago or 3 months ago?

The airlines will always need the sale leaseback market. 40% of the world's fleet is financed by the lessors. So that hasn't changed and I would say what we're seeing now and given the scale of AerCap, being the third largest lessor in the world, the global reach of the company and also the general economic environment, is airlines that traditionally would not have considered the sale leaseback market are looking at it much more closely than they have done for a long time.

Okay. And I guess just a last quick question. On the average time of the leases, it looks like it's trending down a bit both on the new aircraft and the used aircraft, could you explain this? Is there anything going on there?

No, there's nothing really. That's just within the 90-day period, the leases that get booked. So there isn't really anything one or the way.

No real trend there, no.

Yes.

Your next question comes from Michael Linenberg from Deutsche Bank.

Gus, I want to get back to you on the Kingfisher airplanes. I mean, you did indicate you moved them pretty quickly and my sense is that you probably were out there talking to potential lessees, probably 6 to 9 months in advance, given the situation. It was pretty well publicized, Kingfisher. However, when we think about the economic terms that you're receiving now versus what you were receiving when the aircraft were in Kingfisher, how should we think about it? How has -- terms maybe changed, are they similar? Are they degraded somewhat or is it, whatever you can tell us on that would be great.

Sure. Well, as you rightly say, Michael, we weren't waiting for the situation to improve at Kingfisher, we were just acting on what the reality was. And we took the first 2 aircraft out last year, had them move very quickly, and we took the first 4 out, again. We were, by some distance, the only lessor to get serviceable aircraft out quickly. And in terms of the lease rates, what have we seen, there was, on average, about 2 years left on the Kingfisher leases. And so the new aircraft, as you can see from the report there went out at around 5, 6 years leases. So what you saw was that for the remaining 24-month period, yes, there was a lower lease rental. But then on the backend, Michael, there wasn't much of a difference in what we would have assumed on a re-lease event anyway. So yes, you took a little bit -- you took a hair cut obviously for the 24 months but that's not having a material impact at all on the earnings of AerCap. And that's what we've always said about the defaults that, when you look back historically at the impact, given that the security deposits, the reserves, the way in we deal with defaults, you have not seen any material impact on defaults on our statements.

Okay, good. And then were the 4 aircraft, were they moved to one new carrier? Was it 4 new carriers? I'm just getting a sense by their additional diversification or if you're able to move it in one big group.

No, the 6, Michael, went to 3 different carriers. Two last year and the 4 this year went to 3 different carriers.

Okay, good. And just my last question on what you're seeing in the capital market, you talked about the possibility of eventually doing a real unsecured debt deal, we saw United Continental come to market recently. U.S Airways did a deal that was pretty well subscribed including a C tranche. I mean, are you -- do you feel better about where capital markets are today or maybe 3 months ago, 6 months ago? And I realize this is in the context of Europe going into a recession. Can you just give your latest thoughts on how the market currently looks?

For us, Michael, I think the markets, although some of the costs have gone up but recently. I mean, the markets are, I think broader for us and there's more diversified sources of funding. I mean, we obviously did the bank deal on the American Airlines transaction back in late 2011. We did that very quickly even though they went into bankruptcy and that was a market that we're very familiar with and we were still able to execute it even with the change in situation in American. Again, with the credit ratings that we just received, we're going to be able to access yet another pool of capital that we didn't have before. And the other transactions like for Singapore and the like, those deals, we have a continuous flow of available capital for those types of transactions. So and we could also do a securitization I think if we needed to do at this moment. But at this moment, the pricing still isn't at the level that we would like to see so we don't want to increase the level of cost of a significant portion of our planes. But we're going to continue to look at that particular market as well. So again, we don't feel limited at all by the amount of capital that we can access at this point.

Okay, Keith. That's good to hear about the securitization. I think that's a pretty good deal.

Your next question comes from Scott Valentin from FBR Capital Markets.

Just quickly on the delivery schedule from end of the year, the 12 aircraft, $757 million. What is the pace over the course? Is that pretty evenly spread out over the course of the year?

Yes, it is. Yes, it's spread pretty evenly. I think there might be 1 or 2 aircraft different between each quarter but nothing significant.

Okay. And then for 2013, in addition to the $500 million of the A330, what is the current total asset purchase volume for 2013?

I think it's at $1.2 billion, I think with the Singapore aircraft.

With the $500 million? Okay.

Our next question comes from Andrew Light from Citigroup.

It sounds like you had a 98% utilization in the first quarter and it seemed like you think it will go to 100% by the end of the year, I'm just wondering what you expect it to be in the second quarter roughly?

On the utilization rate, Andrew, you'll always have airplanes transitioning. So you'll never have 100% utilization. You'll always have aircraft moving from A to B, it will never -- I mean, maximum utilization is probably 98%. With a fleet of our size, you're always going to have aircraft moving from A to B.

So you it's going to be roughly the same then through the quarters and...

It is. It always hovers between 98% and 99%, yes.

Okay. And just on your acquisition strategy. I mean, you've completely ruling out purchase of -- direct purchase of new aircraft from the OEMs because if I go back to your history was really just about placing large orders, 70, 80 at a time, have you really kind of given up on that market completely?

No, certainly not, Andrew. But I think you need to go back to why and when we ordered. If you go back to the big order we did in 2005, the last time we actually bought new A320s. It was placed at midnight, December 31, 2005, we were still in the downturn and it was the swing order for the year for the 2 OEMs. If you looked at the A330 order, it was placed also when the 380 issues were at the -- when Airbus had the biggest 380 issues of all, they needed some news. Now what you didn't see us do was that the record orders in Farnborough in 2010 and Le Bourget in 2011, where there was record orders. Just like anything, Andrew. Look, if there's a queue of people outside the door trying to buy a condo, it's not a great time to buy. And that's just common sense. So yes, you'll see us go back to the OEMs and there will be plenty of opportunity. But at the moment, what we're seeing is a good opportunity in the sale leaseback market like we did with American, like we did with the 330 deal. I mean, just to order 737-800s from Boeing, you're going to have north of $20 million per airplane in predelivery payment. That's a very large drag on shareholder equity, and it's also a difficult form of funding to obtain. Now with our credit strength, we're able to do it being investment-grade, but you need to think very carefully about it. You need to make sure the risks and rewards are in balance when you do that. And also for us, Andrew, you saw us do the buyback program last year as well. So these are the things we consider when we deploy capital and we continually talk to the OEMs. And you know, if there was nobody in the tent at Farnborough, Le Bourget this year or next year, you'll probably see us there.

Our next question, it comes from Mark Streeter from JPMorgan.

Gus, I just want to follow-up on your response to some of the earlier questions regarding the credit ratings and so forth. I mean, you mentioned that you view unsecured funding as sort of quasi equity, you don't want to get tied up in the unencumbered asset tests of some of your peers and so forth. But I'm just wondering if how sort of fully you're embracing being an investment-grade company and what this means for the company going forward in your funding mix because you have brought your leverage down from the 2.9 to the 2.6 year-over-year. And most companies, once they get an investment-grade rating, they really shift over time to more unsecured funding and so forth to really maximize the availability of those ratings and it sounds like unsecured debt might just play sort of a niche role in the capital structure and you're going to continue to rely primarily on secured funding. I just want to make sure I have that right.

Well, there's a mix of things, Mark. The key thing with us is that we've never had a large parent. So we've always had to make sure that we were aware of all sources of funding that are available. On the secured market there are many different sources, there's the banking market in Europe, there's the banking market in Asia, there's the securitization market. And now when we look to the unsecured market, we would, of course, do a senior unsecured deal with the unencumbered asset test, if the costs of those transactions were lower than what we could do elsewhere. The fact is they're not. And so we can still raise secured funding elsewhere. Now where the investment-grade is of real benefit from an equity perspective standpoint is we can raise the true unsecured money. Look, if you look at the precedent transactions that have gone out from most of the competitors, if they raise $500 million and they're paying whatever it is, 5%, 6%, 7%, 8%, that's their senior debt cost, that's what it is. Because they can't draw down the funds without buying an airplane. What we're saying to you is that this money can be used to fund the equity tranche of those asset purchases or we'll be able to use it for other purpose as well, be that looking at share buyback programs, et cetera. So that's the key difference and that's why it's such a valuable source of capital. So yes, it will never be out of $6 billion balance of debt that we have. Any time soon, I don't see it being north of $1 billion but what is a very valuable is the type of capital and the flexibility that it brings.

I'll just add that the investment-grade rating does help us on the secured side as well because half of our secured financing is recourse debt if you will, so having an investment-grade company standing behind the secured funding certainly is a benefit to lenders.

And then just a follow-up to that, I'm wondering, in order to get S&P and Fitch to the BBB- ratings, given what you're saying and so forth and using unsecured funding as sort of mezzanine or quasi equity, use your word, et cetera. What did you have to promise them in terms of how you're going to run the company going forward? You have brought leverage down, you have improved the credit metrics, do you feel like you're a little bit more range bound now on the leeway you have with them in order to maintain this BBB-, I'm sure you don't want to lose it now that you have it, so I'm just sort of wondering how much flexibility you have with your credit metrics.

Yes. I mean, we don't feel constrained at all, I mean, effectively, getting the investment-grade rating, we showed them our plans, our plans that were put together prior to having to deal with the rating agencies on this matter. I mean, the reality is even though we have secured debt, these structures, these facilities pay down very, very quickly. So our capital structure has become more conservative over the last couple of years and is predicted to become even more conservative in the coming years. So I think with that sort of capital outlook, if you will, the rating agencies are very comfortable with what they were seeing.

So you actually think your leverage will be heading lower than 2.6x.

It's trending that way, yes. I mean, again, because the secured financing is paying off so much. But if we do unsecured that will bring it up again. We would prefer not to see it drop much below the 2.5 to 1 level, if you will because otherwise it becomes a little bit of an inefficient capital structure for the equity side. So 2.5 to 1, fits good for both debt as well as equity.

And on the upside, there's plenty of room to increase that, Mark, as well without having any issue on the raising. And as Keith said, we have to be fair to the equity providers as well that we can't let it really go below 2.5x.

Our next question comes from Glenn Engel from Bank of America.

A couple of questions on the debt. One, when did the interest-rate caps which have been benefiting you start to run out? And the second is, when you want to raise unsecured debts, do you raise it when the market is cheap even though you don't have assets out there to purchase and then you have a carry cost or do you wait until you're closer to finding some assets to purchase before you raise the unsecured debt?

In terms of the caps, I mean, a large portion of the caps run out over the course of the next 3 years, although in some of our portfolios, we're still putting caps in place to go out for years beyond that as well. But the largest portion of the caps, such as [ph] the balance will run off through the next 3 years, and we've been putting on fixed-rate financing primarily in lieu of caps in this current interest rate environment.

And does that raise rates too when you caps run out?

What is the standard?...

If your caps ran out today, what will be the rates be go from 4 to what?

The caps are currently at roughly a 3% rate. And I think your second question was relating to the timing of any potential unsecured deal?

Yes.

Again, we'll take advantage of the current strong markets as soon as possible. So again, we're just looking to deploy the capital as quickly as possible as well.

So there might be some carry costs for a little while but you're presuming not too long?

Right, it could but we're looking to put the money to use as quick as possible. So it won't be a significant carry costs if there will be.

And finally, just the accounting issue, the SG&A, that was down because of the credit, that bounces back up in the June quarter as those foreign exchange derivative credits...

Yes. When you adjust the SG&A for the mark-to-market stuff that falls to there, you'll see that our quarterly trend now is about $20 million to $21 million per quarter.

Your next question comes from Rich Fitzgerald of Jefferies Investments.

Just a few quick questions here. The first is with regard to the guidance around maintenance for the default and restructuring related maintenance rents [ph], the full-year estimate was $9 million, and that's down pretty sharply from last year, as well as 2010. Forgive me if you've already explained this, but why is the fall off there so sharp?

Yes. Again, the way the accounting works on defaults is when you're holding this, the collateral, the security deposits and maintenance reserves, the moment that the lease gets terminated, we are required to record that as revenue. So you get the big income hit [ph] or benefit at the moment that the default happens and then the cost to move the aircraft to another lessee and to put the equipment back in the order that it needs to be happens later. So there's a timing issue relating to the revenue and recognition of expense. So in 2011, you'll see that we made -- we actually had a big positive benefit from an income point of view from defaults. I mean, we had $64 million of maintenance revenue and about $40 million of costs. So there is a net-net benefit of $24 million. And now, in 2012, a lot of the costs that relate to defaults that happened later in 2011 will be incurred 2012. So that's why we have a big negative number. But when you look at the 2 years together, the $24 million are positive in 2011 and then a negative $22 million in 2012, it's a net positive. So we're -- the reason we're putting this charge in here is just to make sure it's clear that because of this particular accounting that you're going to have to take that into consideration when you look at the future profitability of 2012.

Okay. I got it. So sort of, the right way to look at it is kind of a smooth to a rolling basis over several quarters?

Yes, exactly. I mean, you should not get alarmed by the impact in 2012 because you got to look at that in connection with 2011.

Yes, I got it. That make sense. And then the second question was with respect to the updated costs of debt guidance, it went from a range of 3.5% to 4% to just 4%. What was the driver of that?

Yes. As I mentioned earlier, we had a range of 3.5% to 4%. It was on the higher end of that range, I mean, when we have to issue that range, so now we're being just a little bit more specific. The results for the first quarter was 3.9%, so we're just trying to provide a little bit more clarity to the guidance.

One thing about the debt, that's the all-in costs of debt.

That's the all-in costs of debt.

Yes, including fees, hedges and stuff?

Fees, hedges, et cetera, everything in there.

Yes.

Okay. And then last question. A different angle on potential buyback issue. You guys talk about how the board and management continually considers a buyback as one use of capital versus investing in the business and other uses of capital and so forth. I guess my question is if this year's ROE is expected to be about 10%, is it fair for us to infer that management thinks buying back [indiscernible] would have a sub 10% return, however that return happens to be calculated?

No, I think what we look at is we say, "Look, the 10% is an average of all the different transactions that are on the book, obviously, going back to when the company was started." So it's the marginal benefit, it's what we look at. So we say, when we did the 330 deal, when we did the American deal, and indeed, when we did do the share buyback program last year, that's what we look at. We look at the current best use of the proceeds, not the historical return on the book.

Okay, that's fair. What would you say then is the incremental return on equity or return on investment right now in today's market environment? Presumably it's higher than 10%.

Of course, it is. I mean the target is in the mid teens.

So is it fair then to say that so long as the company is not buying back stock, that the anticipated return on stock buyback should be sub 15%?

No, we didn't say that. We said there's a range in there and it will depend on a lot of different things. And also, as you say, as you see on the asset acquisition side, we've been extremely disciplined. So any assets we buy have to be in the zip code of what the buyback would generate as well.

Your next question comes from Joe Gill from Bloxham.

I just have 2 questions to ask in relation to narrowbody and the widebody. And on the narrowbody, first, could you just comment a little bit on used A320, A319 markets in terms of lease rates and demand? And what your perspective on that weak market is, regarding the risks of contamination on the 737, or indeed does the A320 family offer an interesting time for investing at this point? And the second question is in relation to widebodies. And just on the A330 and while it's quite clear that short-term demand is very strong, what do you consider are the risk factors around the A330 asset values over the medium to long term from 787 as it gains critical mass and becomes more commercial and head-to-head competes with the A330?

Sure, on the 330, I mean, the best example I can give you is that we have no aircraft to place. Everything that we have coming back in 2012 is moved. And we only had a couple of A319, they moved as well, so the demand that is out there. The big leasing companies are able to move them and these are the ones that we took back at very short notice from a defaulting airline, and had them moved within a matter of weeks. Now any weakness you refer to will be much more accentuated in much older variants where you're looking at older engine technology than the IAE V2500 A5 or the CFM 56-5E powered A320. So as I said, we don't have any of these aircraft to place. The new A320 market, look, the A320 is the most popular airplane in the world in terms of the user base. It has the biggest user base in the world. It is not going anywhere. And if you can buy them at the right price, you can buy them all day long, because these things are going to be around for a very, very long time to come just like the 737 Classic. The 737 Classics, we're still moving those on managed portfolios where we have them without any difficulty. Now turning to the A330 market and the 787, what you have to precede is that long-term value of an aircraft is determined by its user base. The bigger the user base, the more durable the residual value is going to be. The biggest widebody user base in the world is with the 330s. It has been the only small widebody in the world effectively for the last 12-plus years. If the 787 had come out much sooner, it certainly would have stopped the growth of that user base. But the A330 has the biggest user base out there of in-production airplanes. And it's a bit like the 767, if you bought the 767, you would have done very well if you held it for a long time because you had no competition, it built up a huge user base and the 330 has taken over from that. Now in the long run, the 787 will take over but it's a long, long way off and furthermore the 787 is an expensive machine. It is substantially more expensive than an A330. And so yes, those customers who got in at the start are probably getting a very good deal because of the penalties of frozen escalation, et cetera. But the marginal cost of the 787 is a bit different. And so I think for that reason, you will see the 330 has a very long life ahead of it. And also today's news on the 350 as well, you saw the [indiscernible] and so the 350 program has its own issues to deal with too.

[Operator Instructions] You have a follow-up question from John Godyn from Morgan Stanley.

I just wanted to ask a couple of follow-ups here. First of all, I know you guys don't have a history of dividends. But if you can just update us on your thought process there just to make sure that nothing has changed, or if it does, does [indiscernible]?

I mean, as I said, John, look, the board continually evaluates how we deploy the capital, be it returning it to the shareholders or be it to reinvesting it, and dividends is one of the things that I've talked about every quarter, as are buybacks, as are acquiring aircraft. So it's something that's given close consideration continually. There's no plan to pay a dividend at the moment.

Okay, that's helpful. And I know you're not going to tell us when or if you're going to do a buyback around the corner here, but I just wanted to follow up on some of the commentary that came after my question. There was this idea that -- I think you guys said that you were seeing sort of mid- to high-teen ROEs in the marketplace on aircraft and somebody was comparing it to sort of a 10% hurdle. Am I right in thinking that the way that you would think about a buyback is you would compare it to the fact that your stock is trading at a significant discount to book? So actually the yield on a buyback, it's probably in the mid- to high teens right now because of the discounts. Is that the right way to think about it? And in that case, it's a little bit more comparable.

They are very comparable at the moment. But you've seen us, John, we've been very disciplined about buying assets, we don't buy them unless they're accretive to shareholders. And the test there is what do we get by using the capital to buy back shares. So the 10%, the reference in the earlier question, the 10% was just to the current ROE on the total book, but as we look to redeploy capital, we look at the benefit of investing it today on aircraft today or the buyback.

We look at the accretion benefit on our earnings per share benefit both on investments in aircraft and investments in buying back shares.

Okay. And the last question here. You guys did a 12.8% lease rate factor this quarter. Just kind of synthesizing everything we're hearing about the market stabilizing and potentially improving later in the year across a lot of aircraft type, is it fair to say that, that can go higher or will that be sort of flat throughout the year, how do we just think about that?

I think you'll see it at a relatively stable amount over the course of the rest of the year. I mean, again, when you look at not just the top-line yield but also the net interest margin, over the last couple of years we've been at that 900 basis points of margin and first quarter was 8.85% and I think you should expect to see that something comparable for the rest this year.

Our next question comes from Jamie Baker from JPMorgan.

This is actually Joe Abboud for Jamie Baker. I had a quick question regarding, I know you guys spoke pretty extensively in the beginning of the conversation about the relative attractiveness that you're seeing right now in terms of sale leaseback purchases, and I was wondering, given the pull back in export credit, have you guys noticed or seen any more extensive conversations with airlines now that maybe they are a little bit more worried about their funding there or is that not yet visible?

I think on the export credit, I mean the full impact of it has yet to be felt. But you must bear in mind that even the higher fees will probably be financed by banks as well because they are covered by sovereign guarantees. The issue on the export credit is just more about the capacity, how much more will they do and certainly though airlines are concerned about that and they're looking to diversify the funding sources away from and the ECAs and the ECAs are pushing them to do that. When I say ECAs, I mean, both collectively Exim and the ECAs in Europe. They are pushing airlines back, saying, "Don't keep coming to us. Go out there. We know there's transactions out there from the big leasing companies." But I think the comment I made earlier on is the key one, which is that because of the general economic environment, the price of fuel, you are seeing airlines that typically would not look at the sale leaseback market looking very hard at it right now.

And just one other question regarding your kind of, I say, your geographic placement or profile, where you guys are seeing as the most attractive opportunities? I know that earlier you made a point about how 3 quarters of your revenue was generated outside the EU. So obviously, the EU has run into a lot of difficulties right now, there's credit worthiness issues there. But I mean, we're also seeing obviously to the extent Kingfisher and some of those airlines in Asia struggling to some extent as well. So is there any particular region of the world where you're finding the appropriate mix, I would say, of the revenue opportunity as well as the credit worthiness of those customers? Are you focused on Asia still, or is there any mix of change there?

There isn't really. I mean the opportunity is still pretty diverse. I mean, we're looking at opportunities be it in the American hemisphere, north and south, and in Asia as well and of course, you would as well in Europe. Sometimes, you do your best deals when someone needs you, when you understand the transaction, take our example with American Airlines. You've got to understand the whole transaction and how you balance the risks and awards, that's the key, if you got the right airplane, you always start with the right airplane don't buy the lessee name. Buy the right airplane at the right price and make sure that you understand the risks and mitigate them correctly. That's the key to successful investing. Don't lose your discipline. You know what airplanes you want to buy and just stick with those underwriting parameters. Don't chase market share and this market will come to you because we do have a non-investment-grade customer base. It's never going to change. The business is deeply capital-intensive so they will always need you. So be patient. And as you the patience has paid off with the American deal and the deal that we have under of letter of intent on the 330s.

Thank you. We don't have any further questions at this time. Please continue with any further points you wish to raise.

Thank you, operator. I believe we have one more question.

We have a question from Gary Liebowitz from Wells Fargo.

The incremental 737 that you are buying from American, are those being funded on a fixed-rate basis or on a floating-rate basis?

It's about half and half, Gary.

Okay. And the other question I have was, following up on the earlier interest rate question or costs of debt, it was up about 30 basis points year-over-year but I think LIBOR has basically been flat-lined. It this just a function of the mix of debt that's outspent [ph]? In other words, you are paying the low-rate securitization debt pretty quickly or should we continue to see this trending up a little bit each quarter?

Again, it's really question of the mix. Your point is right. I mean the very inexpensive securitization debt is continuing to pay down very quickly and we are putting on more fixed-rate financing as a new business effectively. So that's what's brought it up to the high 3% level, if you will. It was as low as 2.7%, 2.8% a couple of years back. So it's really been a mix change there. But as we indicated in the guidance, you should see us stabilizing at the 4% level.

Thank you. We have no further questions at this time. Please continue with any further points you wish to raise.

Thank you, operator, and thank you, all, for taking the time and dialing to the call. And we look forward to speaking to you for the second quarter results.