BP Said To Seek $5 Billion In One-Year Credit Lines
The liquidity crunch is now palpable. Time for sellside desks to reevaluate their liquidity forecast models. As for the success of the credit facilities: with banks actively hedging their counterparty exposure, we are not sure any syndicate will be willing to take on the incremental balance sheet risk without being able to syndicate it to end buyers, and that will be problematic.
BP Plc, the target of more than 220 lawsuits over the Gulf of Mexico oil spill, is seeking to raise at least $5 billion from banks for a new credit line to meet compensation payments, according to two bankers approached by the company.
BP has asked lenders for one-year credit lines, one of the people said. It is arranging the transactions individually with banks, said the people, who declined to be identified because the talks are private. The financing is in addition to London- based BP’s $10.5 billion of undrawn credit lines, the people said.
BP spokeswoman Sheila Williams declined to comment.
The funds may give BP additional flexibility if borrowing in bond markets becomes too expensive after the company’s debt was cut six levels to BBB from AA by Fitch Ratings June 15. The company had $27.7 billion in cash flow from operations in 2009.
As a reminder here is BP's monthly debt distribution:
Some chunky maturities in there coming up...
As a result of this transaction, more assets will be pledged as collateral at the HoldCo, and less cash will be available to shareholders in case a bankruptcy does actually occur. Then again, if there is indeed a Chapter 11 (or 7), pledged collateral will be the least of the Scottish Widows' concerns.