UPDATE: DNB Markets Downgrades Safe Bulkers to Hold on Business Partner Risk
DNB Markets reduced its rating on Safe Bulkers (NYSE: SB) from Buy to Hold and reduced its price target from $7.50 to $6.
DNB Markets said, "Combining the ongoing turbulence among Safe Bulker's Japanese counterparties with the fact that its valuation is heavily reliant upon its dividend capacity, we believe the current risk/reward is out of balance. … We understand from industry sources that some are no longer doing long-term business with Daiichi. Kawasaki was one of the car carriers raided by Japanese antitrust authorities, and earlier this week S&P put it on “CreditWatch with negative implications”. Safe Bulkers does not provide full transparency in terms of TC counterparties, but we can see from its 20-F that Daiichi Chuo and Kawasaki Kisen together accounted for 66.1% of revenue in 2011. With this in mind, we view it likely that Safe Bulker's TC contracts with each have a current MTM value of USD15m–25m, or more."
Safe Bulkers closed at $5.51 on Wednesday.
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