BP set to cap oil spill and maybe go bankrupt

As BP celebrates the successful cutting of the pipe, bonds have fallen sharply as markets consider BP more likely to default. The downfall began after the “top kill” plan failed to stop the oil leaking in the Gulf of Mexico. BP bonds have continued to fall, even though the shares recovered on Wednesday.

Map

The rating agency, Fitch, cut BP’s credit rating and threatens continued downgrades as the cost of the leak gets higher. Fitch cut BP’s rating by one notch, from AA+ to AA, though that’s still one of the highest investment credit ratings.

The real trouble is that bond markets are pricing BP’s debts at levels with “junk” rated companies. The US is asking BP to reserve money for clean-up costs.

BP has said it would pay for the construction of six sand barriers off the coast of Louisiana to protect wetlands. BP would also like to start collecting the oil from the surface to try and use it.

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Posted on June 3, 2010, in Energy, Market Trends and tagged , , , , , , , . Bookmark the permalink. 1 Comment.

  1. I’m getting increasingly uncomfortable seeing the way the US government and media are treating BP. The oil leak in the Gulf of Mexico is obviously a terrible environmental accident. It’s entirely understandable that the people and authorities are upset and want those who made the mistake to put it right. But it is increasingly looking like the US government is deliberately trying to make political capital out of scapegoating a British company and opportunistically running it down for the benefit of American companies.

    Why are they not equally holding responsible other parties- the American Drilling company, Halliburton and the US regulatory authorities?

    Why do they not let all hell break loose when it is an American company causing an environmental disaster in another country? Do you remember Union Carbide’s killing and disabling hundreds of thousands of people in Bhopal, India? They did their very best to wriggle out of responsibility as much as they could- frankly because they didn’t value Indian lives as much as Americans and because India was a weaker country. So how does that compare to their extreme attacks on BP? American beaches and fish are worth much more than hundreds of thousands of Indian humans. Sad but true.

    Will the US be aggressively running down their own companies in future overseas accidents? I doubt it.

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