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.
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.