Tuesday, June 15, 2010

BP's (NYSE:BP) CDS Costs Rise on Fitch Downgrade

The huge downgrade by Fitch Ratings for BP (NYSE:BP) (LON:BP) had an immediate effect on the cost of securing debt, as the cost of compensating those affected by the Gulf spill rise, and the time-frame to pay claims is diminishing.

With the drop from AA debt to BBB debt, the cost of credit default swaps for BP rose right away, sending the spread wider.

BP's CDS increased to 465 basis points, up almost 75 basis points from the close on Monday, according to Markit. This seems to have been anticipated though, as the basis points had already been moving up even before the downgrade.

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