DryShips Downgraded By Deutsche Bank And Imperial Capital

DryShips Inc. (NASDAQ: DRYS) was downgraded by Deutsche Bank and Imperial Capital on Monday.

Deutsche Bank analyst Amit Mehrotra downgraded the stock from Buy to Hold and lowered the price target from $5 to $2.

Imperial Capital analyst Andrew Casella downgraded the stock from Outperform to Underperform and lowered the price target from $4 to $1.40.

Mehrotra noted that "the company announced that it has withdrawn its offering of $700 million in secured notes due to 'current market conditions'. The proceeds were to be used to re-finance $700 million in Convertible Notes which are maturing on Dec 1. Our call with the Company this morning did not leave us overly confident that there was a clear path to a near-term solution."

Casella considered "the risk dynamics of the equity to have moved asymmetrically to the downside. In our view, the best case scenario for DRYS is the completion of its refinancing and the common stock continues to trade right around its NAV of about $1.86 per share."

Mehrotra observed that "just a $5,000/day increase in spot rates would drive a more-than-doubling of DRYS’ shipping-segment EBITDA (~$70M to $150M based on 2Q14 run-rate). As such, we believe DRYS shares continue to warrant close watch with potential for significant net upside (for new investors) once near-term capital structure hurdles are cleared."

DryShips Inc. closed Monday at $1.47, down 21 percent.