UPDATE: Morgan Stanley Reiterates on McDermott International Following Equity Offering Announcement

In a report published Tuesday, Morgan Stanley analyst Ole Slorer reiterated an Underweight rating on

, and lowered the price target from $6.30 to $6.00. In the report, Morgan Stanley noted, “MDR announced that it is offering 10MM tangible equity units, each with a stated value of $25, with a greenshoe option of 1.5MM units. We estimate that MDR will receive $287.5mm, assuming the option is exercised. We understand that the conversion price would ultimately be determined by where the stock is trading 3 years from now, but bound by where the offering prices and 20% above that level. "We estimate a range of $7 (10% below where the stock has closed) and $8.40 (20% above that price). This implies that each Unit would convert to 3-3.6 shares, for a total of 35-41mm shares or 14-17% dilution. As part of this offering, MDR would also be required to pay $10-15mm/year for 3 years on an amortizing note.” McDermott International closed on Monday at $7.82.