BP Hiring Four More Banks, Total Tally Now At Seven, Scrambles To Create Underwriting Syndicate
As previously reported, BP has already hired Goldman, Blackstone and Credit Suisse. Now Charlie Gasparino reports that the British firm is apparently in the process of hiring every single investment bank in existence: new banks rumored to be in contract negotiations include Morgan Stanley, HSBC, UBS and Standard Chartered. According to Charlie "they are being asked to somehow guarantee that they would lend money to the company." Another angle is that the firm is preempting any possible hostile takeover, by preventing any competitor firm from hiring any of these banks, which pretty much round out all the megabank firms that have a credible capital markets desk (sorry RBS), and thus make a hostile acquisition problematic. At least so far there has been no taxpayer capital going to BP, so retainer and success fees for the 7 banks, which will likely run into the hundreds of millions, will only be footed by BP's ever angrier shareholders.
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buying spree, offering several large financial institutions lucrative roles as advisers on financing deals in exchange for guarantees that they will help the firm raise money in a pinch, FOX Business has learned.
The troubled oil giant has already hired Goldman Sachs (GS: 136.66, -0.44, -0.32%), Credit Suisse (CS: 40.672, 0.192, 0.47%) and Blackstone (BX: 10.43, -0.22, -2.07%) as advisers, but it is in negotiations to bring aboard Morgan Stanley (MS: 25.48, -0.26, -1.01%), HSBC (HBC: 47.94, -0.04, -0.08%), UBS (UBS: 14.06, 0.26, 1.88%) and Asian bank Standard Charter. People at the firm say the sticking point is that they are being asked to somehow guarantee that they would lend money to the company.
A BP spokesman had no immediate comment. Officials at these firms also had no comment.
Underwriters are often asked to provide multiple financing arrangements, but U.S. securities laws prohibit underwriters “tying” of various assignments, meaning they cannot offer to make bank loans in exchange for being hired as an investment advisor. However, the companies themselves can demand access to bank lines of credit in exchange for hiring on other assignments, which appears to be the case here.
For BP, however, the access to cash is important for its survival. The massive spill in the Gulf of Mexico and its potential financial impact – Credit Suisse estimates it might cost the company nearly $40 billion—has raised the possibility that the firm might have to file for bankruptcy protection. It has already agreed to a demand from president Obama to set aside $20 billion to cover liabilities stemming from the oil spill.