After gaining control of the oil spill in the Gulf of Mexico, Fitch has raised the credit rating of BP (NYSE:BP) up three notches.
Both the senior unsecured rating and long-term issuer default rating were raised from BBB to A, said Fitch in a statement. They also said their outlook on the oil giant is stable.
Fitch said, their increase of the ratings and outlook “reflect an end to the threat of leaks from the Macondo well." They added it “also reflects both the improved visibility of potential liability scenarios” and “substantial progress that BP has made to date in building up liquidity to address potential financial payments.”
In the midst of the oil spill, on June 15, Fitch has slashed BP's rating by six levels to BBB. That's only two levels above junk. That was related to the uncertainty of the costs and level of debt that may have had to incur in order to pay for the accident.
While BP does have credit available in case of emergencies, they've chosen to primarily raise funds by divesting of assets, which also helps strengthen the credit outlook for the company now that the well has been plugged.
Showing posts with label BP Credit. Show all posts
Showing posts with label BP Credit. Show all posts
Wednesday, September 8, 2010
Wednesday, July 28, 2010
BP's (NYSE:BP) Bonds Up as Market Likes Strategy to Raise Capital
The market liked what they heard from BP (NYSE:BP) on plans to raise capital to deal with the oil spill by selling billions in assets, rather than primarily go the debt route, although they have billions in credit lined up from about a dozen banks to go that route if they have to.
As a result, bonds from BP have went up for two days in a row while the cost of credit default swaps fell, which is insurance used to protect investors against default by a company.
This of course precludes bonds, which are debt after all.
MarketAxess reports that traders were primarily targeting short term bonds of BP, which they pushed up by 3/4 point to a 4.994 percent yield. In comparison to Treasurys, that's 400 basis points above their yield.
Notes due November 2013 which stood at 5.25 percent were the most active.
The progress of BP in stopping the oil from flowing into the Gulf, along with being close to permanently plugging the well has generated optimism.
Fixed-income managers said BP is still a very risky company, even though things have the appearance of settling down.
It won't really be until a firmer grip on overall liabilities emerge, that a more accurate picture of the health of the company in the years ahead will be really known.
And all those assets they're being forced to sell, will also be lost revenue and earnings.
So while a leaner BP with new leadership sounds more attractive than what they've been, it presents a entire new set of problems that can't be dismissed out of hand.
As a result, bonds from BP have went up for two days in a row while the cost of credit default swaps fell, which is insurance used to protect investors against default by a company.
This of course precludes bonds, which are debt after all.
MarketAxess reports that traders were primarily targeting short term bonds of BP, which they pushed up by 3/4 point to a 4.994 percent yield. In comparison to Treasurys, that's 400 basis points above their yield.
Notes due November 2013 which stood at 5.25 percent were the most active.
The progress of BP in stopping the oil from flowing into the Gulf, along with being close to permanently plugging the well has generated optimism.
Fixed-income managers said BP is still a very risky company, even though things have the appearance of settling down.
It won't really be until a firmer grip on overall liabilities emerge, that a more accurate picture of the health of the company in the years ahead will be really known.
And all those assets they're being forced to sell, will also be lost revenue and earnings.
So while a leaner BP with new leadership sounds more attractive than what they've been, it presents a entire new set of problems that can't be dismissed out of hand.
Tuesday, July 20, 2010
BP (NYSE:BP) Debt Costs Rise on Potential Seepage Concerns
The up and down narrative of BP (NYSE:BP) continues on, as concerns there may be some oil seepage after putting on the new containment cap raised the cost of insuring debt by 7.2 percent on Monday morning.
Credit default swaps are what are used to protect against defaulting on the debt of a company, and that's what went up in price.
This has been a consistent theme for BP and other oil companies with exposure to the Macondo oil well spill, as the bad news drives costs up and good news brings it back down.
Obviously this has been a story of rise and falls, and turbulent costs that move every time a different story emerges.
Recently credit default costs had fallen on the good news of containing the leak, but the recent potential for even partial or small failure shows the volatility connected to the insurance market in this particular area.
Credit default swaps are what are used to protect against defaulting on the debt of a company, and that's what went up in price.
This has been a consistent theme for BP and other oil companies with exposure to the Macondo oil well spill, as the bad news drives costs up and good news brings it back down.
Obviously this has been a story of rise and falls, and turbulent costs that move every time a different story emerges.
Recently credit default costs had fallen on the good news of containing the leak, but the recent potential for even partial or small failure shows the volatility connected to the insurance market in this particular area.
Wednesday, June 30, 2010
TNK-BP Could Buy BP (NYSE:BP) Assets
One strategy BP (NYSE:BP) is sure to have to employ before the oil spill fiasco is over will be to sell off some of its assets in order to generate more liquidity for the company.
To that end, Russian joint-venture partner TNK-BP said it would take into consideration buying some of the assets held by BP when they are put on sale.
Maxim Barsky, who is deputy chief executive of the joint venture, said he and BP CEO Tony Hayward discussed this when he recently met in Moscow to talk with TNK-BP's chairman Mikhail Fridman.
Hayward did say on the same trip, to Russia's leading energy official, Igor Sechin, that BP had no plans to sell any of its assets in the country.
To that end, Russian joint-venture partner TNK-BP said it would take into consideration buying some of the assets held by BP when they are put on sale.
Maxim Barsky, who is deputy chief executive of the joint venture, said he and BP CEO Tony Hayward discussed this when he recently met in Moscow to talk with TNK-BP's chairman Mikhail Fridman.
Hayward did say on the same trip, to Russia's leading energy official, Igor Sechin, that BP had no plans to sell any of its assets in the country.
Wednesday, June 23, 2010
BP (NYSE:BP) Credit Default Swaps Rise Again, This Time On Weather Concerns
Credit default swaps are used by a company like BP (NYSE:BP) to protect against the possibility of defaulting on bonds, and the costs to protect that debt has risen again, this time by 61 basis points, to 539.3 basis points for the oil giant.
Much of this is based upon the potential disruption of their Gulf oil spill cleanup efforts, now that the hurricane and storm season is upon us.
As early as next week the first Atlantic storm may enter the Gulf, with the worst storm season in history possibly happening this year, with up to three major storms projected to impact the Gulf, and consequently, the oil cleanup.
A buyer of bonds is paid the face value by the credit swaps if a borrower doesn't meet their obligations.
The basis point refers to what a company pays to protect $10 million in debt on an annual basis, with one basis point equaling $1,000. So the higher the basis points the higher the cost of protecting the debt.
Since April 20, the cost of protecting debt has risen 12 times what it was at the time, another element added to the costs associated with BP doing business.
Much of this is based upon the potential disruption of their Gulf oil spill cleanup efforts, now that the hurricane and storm season is upon us.
As early as next week the first Atlantic storm may enter the Gulf, with the worst storm season in history possibly happening this year, with up to three major storms projected to impact the Gulf, and consequently, the oil cleanup.
A buyer of bonds is paid the face value by the credit swaps if a borrower doesn't meet their obligations.
The basis point refers to what a company pays to protect $10 million in debt on an annual basis, with one basis point equaling $1,000. So the higher the basis points the higher the cost of protecting the debt.
Since April 20, the cost of protecting debt has risen 12 times what it was at the time, another element added to the costs associated with BP doing business.
Wednesday, June 16, 2010
$100 Million of BP (NYSE:BP) Debt Acquired by Bill Gross
PIMCO co-chief investment officer Bill Gross revealed on Wednesday that he has acquired $100 million in BP (NYSE:BP) debt, as well as some Anadarko Petroleum (NYSE:APC) paper as well.
The debt acquired by Gross is short-maturing notes.
Gross said, "At this point, if you can get 10 percent on one-year paper on BP, we think it's closer to double-A than triple-C. That's a significant (thing). We started to buy some."
The cost of BP insuring its debt has risen to over $600,000 for each $10 million protected over a five-year period.
The debt acquired by Gross is short-maturing notes.
Gross said, "At this point, if you can get 10 percent on one-year paper on BP, we think it's closer to double-A than triple-C. That's a significant (thing). We started to buy some."
The cost of BP insuring its debt has risen to over $600,000 for each $10 million protected over a five-year period.
BP (NYSE:BP) Debt Insurance Costs Soar Again
The cost of insuring BP's (NYSE:BP) debt has risen again, as credit default swaps rose to 620 basis points, up from yesterday's close of 495 basis points.
That brings the cost of insuring their debt to $620,000 for each $10 million insured over a five-year period. Just on Monday it stood at $424,000 for each $10 million insured.
This is the highest levels BP has ever reached in insuring its debt levels, and comes on the heals of ongoing pressure to create a huge escrow account to pay out claims from, and being turned on by those in their own industry, all of which points to more potential financial liability in the situation.
Fitch Ratings also downgraded the company by six notches on Tuesday, dropping them from AA to BBB, not far above junk status.
That brings the cost of insuring their debt to $620,000 for each $10 million insured over a five-year period. Just on Monday it stood at $424,000 for each $10 million insured.
This is the highest levels BP has ever reached in insuring its debt levels, and comes on the heals of ongoing pressure to create a huge escrow account to pay out claims from, and being turned on by those in their own industry, all of which points to more potential financial liability in the situation.
Fitch Ratings also downgraded the company by six notches on Tuesday, dropping them from AA to BBB, not far above junk status.
Bank of America (NYSE:BAC) Limits BP (NYSE:BP) Trades
According to a source close to the situation, Bank of America (NYSE:BAC) has told its traders they can't participate in oil trades with BP (NYSE:BP) (LON:BP) which go beyond June 2011.
Under conditions like these, it's almost certain the directive was made because of the liability the oil giant faces, and which are unpredictable beyond that time period.
Normally a company does this in order to protect itself from taking a big hit over the long haul, which in this situation with BP, a year would represent.
There are no guarantees BP will be able to meet its obligations beyond that time, and this is a move by Bank of America to protect itself from potential fallout.
These concerns are also displayed with the growing cost of credit default swaps, which have increased to 515 basis points, and seem to rise every couple of days as the spectacle continues.
What this means is it costs BP $515,000 to insure every $10 million in debt over a five-year period. Just a little over a month ago CDS were at 40 basis points at BP, costing them only $40,000 for each $10 million.
Fitch Ratings downgraded the credit of BP by six notches today, from AA to BBB, placing them not too far away from being considered junk status.
All of this confirms BP is not a good bet over the long term, the reason for the orders from Bank of America concerning BP trades.
Under conditions like these, it's almost certain the directive was made because of the liability the oil giant faces, and which are unpredictable beyond that time period.
Normally a company does this in order to protect itself from taking a big hit over the long haul, which in this situation with BP, a year would represent.
There are no guarantees BP will be able to meet its obligations beyond that time, and this is a move by Bank of America to protect itself from potential fallout.
These concerns are also displayed with the growing cost of credit default swaps, which have increased to 515 basis points, and seem to rise every couple of days as the spectacle continues.
What this means is it costs BP $515,000 to insure every $10 million in debt over a five-year period. Just a little over a month ago CDS were at 40 basis points at BP, costing them only $40,000 for each $10 million.
Fitch Ratings downgraded the credit of BP by six notches today, from AA to BBB, placing them not too far away from being considered junk status.
All of this confirms BP is not a good bet over the long term, the reason for the orders from Bank of America concerning BP trades.
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