Deutsche Bank Reiterates Buy Rating on Genco Shipping (GNK)

Deutsche Bank is out with an analyst note this morning, where it reiterates its Buy rating on Genco Shipping GNK; it has a $23.00 price target on the stock. The DB analysts said, “Last week, GNK concurrently priced a convertible senior note ($125 million), common stock offering ($58 million) and received commitments for two senior secured bank loans ($353 million). Net proceeds from the offerings and facilities will be used to fund the majority of the previously announced $606 million Metrostar and Bourbon acquisitions. The remaining portion of the acquisition financing will be funded through cash on hand.” They added, “While the capital markets have virtually shut for most shipping companies since Q1’s IPO surge, GNK has been able to access both debt and equity capital markets. GNK’s 3.59 million (includes 0.47 million over-allotment) common share issuance was priced at $16/share in a one-day marketing and including Friday’s announcement of the underwriters’ exercising its over-allotment, raised gross proceeds of $57.5 million. GNK also placed a $125 million, 5% senior unsecured, convertible note carrying a 22.5% conversion premium (based on $16 common offering price).” They DB analysts closed by saying, “We have revised our earnings estimates to include the acquisitions and financing. We are increasing our 2010 and 2011 EPS estimates to $4.05 and $2.32 from $3.94 and $2.01. We are lowering our price target to $23 per share from $25 per share based on a lowered 7.5x from 8.0x EV/EBITDA multiple and our estimated 2011 adjusted EBITDA of $304 million. Risks include convertible share dilution, a double dip and slowdown, Chinese and Indian demand recovery in Q4, increasing vessel deliveries and re-chartering ability.”