Credit Suisse Boosts AerCap Estimates, Price Target

In a report published Friday, Credit Suisse analyst Moshe Orenbuch maintained an Outperform rating on

, while raising the price target from 55 to 57, after the company repurchased more than 7 percent of its shares, effectively eliminating the stake held by

. AIG announced its intention to sell 71.2MM AerCap shares to the public. The sale would be at $49 per share, totaling $3.5Bn, and includes the option to sell an additional 10.7MM shares. AerCap plans to purchase an incremental $750MM, or 15.7MM shares from AIG. AerCap's repurchase will reduce share count by 15.7MM or 7.4 percent of shares, while AIG's 71.2MM/79.9MM will not reduce shares outstanding. "This transaction would eliminate AIG's position if the underwriters' overallotment is exercised," analyst Moshe Orenbuch said. AerCap has agreed to pay $250MM in cash to AIG, and issue a $500MM subordinated note to the insurer at a 6.5 percent interest rate. "We believe that AerCap's debt to equity ratio will be ~3.4x at the end of 2Q15; however, AerCap could receive partial equity credit with respect to this note given that the issue is subordinated to AerCap's non-sub debt," Orenbuch added. The GAAP estimates for 2015, 2016 and 2017 have been raised from $5.09 to $5.23, from $5.13 to $5.26 and from $5.57 to $5.71, respectively. The adjusted estimates have been raised from $5.64 to $5.80, from $5.90 to $6.06 and from $6.68 to $6.87. The upward revision of the price target reflects "greater capital return and removal of the AIG overhang," the report explained.