Deutsche Bank Downgrades Capital Product Partners (CPLP) to Hold; Predicts Dividend Cut

November 2, 2009 8:57 AM EST

Deutsche Bank downgrades Capital Product Partners (Nasdaq: CPLP) from Buy to Hold. Price target $8.

Deutsche analyst says, "Friday morning CPLP reported Q3 EPU of $0.28/unit, $0.03 below our estimate and consensus of $0.31, with the downside driven primarily by higher interest expense. CPLP announced on the call that it would potentially be operating its near-term charter roll-offs on the spot market, which adds incremental downside to our estimates and CPLP’s risk profile. We are downgrading CPLP to a Hold, as CPLP’s possible entry into the spot market adds incremental risk to its story...We believe CPLP will eventually cut its dividend to a more sustainable level, barring material near-term upside in the product tanker environment. Our previous stance had been that while a dividend cut was possible, CPLP’s strategy to look for long-term charters (which are 56-65% higher than current spot rates) would limit the severity of the dividend cut. However, given CPLP’s new potential spot employment, we believe that dividend cut could be sooner and harsher than initially anticipated.

"We are lowering our 2009E and 2010E EPU to $1.22 and $0.47, down from $1.26 and $0.96, with downside driven largely by decreased revenue stemming from near-term vessel employment in the currently unprofitable spot market."

To see more analyst ratings on CPLP Click Here.

Capital Product Partners L.P. owns double-hull medium-range product tankers worldwide.

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• Deutsche Bank
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