UPDATE: Maxim Cuts Genco Shipping (GNK) to Sell, Price Target Slashed to $0.25

Maxim Group downgraded Genco Shipping (NYSE: GNK) from Hold to Sell with a price target of $0.25. The change follows a reorganization plan filed last night.

Analyst Noah Parquette said, "As a result of the restructuring, existing equity claims will be cancelled and equity holders will receive seven-year warrants for 6% of the new equity struck at a $1.295 billion equity valuation. Additional six-year warrants will be given to management in the form of an incentive structure with 1) the first tranche representing 3.5% of equity at $1.618 billion, 2) the second tranche also representing 3.5% of equity at $1.81 billion and 3) the third tranche representing 5.0% of equity struck at $2.195 billion."

"Current price is significantly above what we believe the warrants could be worth, downgrading to a Sell with a $0.25 price target. The warrants are breakeven at an equity value of $1.295 billion, which essentially implies asset values increase 13% from current levels (see valuation below). Our $0.25 price target is based on asset values increasing roughly 25% from current levels, which we believe is reasonable, albeit potentially conservative, given where we are in the dry bulk cycle. Furthermore, the warrant valuation will be exposed to dilution if asset values increase further from that point due to the management warrants being potentially exercised," he added.

For an analyst ratings summary and ratings history on Genco Shipping click here. For more ratings news on Genco Shipping click here.

Shares of Genco Shipping closed at $1.53 yesterday.

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