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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.
From Bloomberg:
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.
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What happened to selling assets to cover the costs, which was discussed yesterday? Debt. Debt. Debt. Taxpayer. Taxpayer. Taxpayer.
Not to mention that the clean-up crew is fishermen, etc, that have lost their livelihoods. They are not allowed to wear gas masks (at the risk of being fired) and are now only required to have 4 hours of training.
These clean-up hires could die long slow painful deaths from excess flurocarbon exposure and the terrible air they are breathing which has been well documented, or they might not. But what a great set-up to get rid of the plaintiffs that may be 20 years out in settling.
O/T--This just in: Volcker rule to be added to Dem Fin Reg.
The damages from this well will far exceed their market cap as it stands today let alone where it is next week and the week after. What nobody seems to be taking into account primarily because of this adminstration and the media blackout is how noxious the hydrogen sulfide and benzene combination. This gas can be fatal, can cause cell mutation and since this volcano will not be stopped for another 2 months at best eventually these people will need to evacuate along the coast.
BP will have no choice but to go under and sell of their assets as the claims mount. Wait till Jimmy Buffett starts getting on T.V. talking about the manatees in the Keys. BP is responsible for the real estate value lost that come from an evacuation, the job loss. We are one piece of news away from a 50% haircut on BP from this level and once the conclusion is slowly drawn that a BK is inevitable straight to .10 cents for BP.
With that anyone even contemplating a market rising with this kind of catastrophe occuring is six ways from Sunday fucked in their brain.
Also BP showed weakness by approaching the banks. What will occur is that the Gangster crew will " consult" BP long enough for the boys to take a look at their balance sheet and as we speak Goldman & The Morgan Boys are well aware that they can make far more destroying BP than protecting it for measly fees.
Whoever had the idea of allowing them invite the vampire in should have asked Fuld what happened when he let GS & the treasury get a ganders at their books.
...and the HFT algos will bounce this bitch from $0.10 to $1.10 overnight. Like Fannie and Freddie, BP will have to trade around $1 for about a year before the plug is pulled.
+1, great post.
No truer words have ever been spoken.
Indeed.
We will bail them out in the end and the Government will own another chesspiece in this socialist game.
Government won't touch it, it will be Bernanke that owns it along with:
Maiden Lane I
Maiden Lane II
Maiden Lane III
Fucked Up Gulf of Mexico/BP Trust I
and so on....
From my understanding, that's exactly what GS did when they got a look inside LTCM's black box - they went out & front ran all their trades and made a grip
Very informative post, McCloy.
The Government is loaning the 20 Billion...BP will come up with 5 billion by the year's end then payback at 4billion/year thereafter. BP has put up their US assets on this loan.. Should BP go under... You guessed it the US Government, not the shareholders are first inline- ahead of the shareholders (as confirmed in the unconstitutional case decided againt the Chrysler & GM shareholders).
It is about time that people understand this is all going according to plan for the sheriff of RockRidge.. If the leak does not get fixed, he now has a an oil company to go along with his Auto and Bank portfolio.
and we all sing "this town is turning into shit."
correction to your post: you repeatedly say "shareholders" but I think you mean "secured creditors".
Heh.
Now President Obama learns who the real small people are.
"Most powerful man in the free world" my ass.
Seriously, i would almost forgive BP (almost being key here) if Hayward were to stand up and tell those useless POS in congress to FUCK OFF.
As always the only thing that mattered to anyone is that the executives and the politicians gets paid off and profits are maximized, regardless of the risk. See the financial system for how this works.
BP and the government deserve each other. They both take shameless lying, and blaming one another to an embarrassing new level.
Apparently BP carved out $20b in assets and granted the US Govt a lien on them...however I have only seen this reported in one place - it was not reported as to whether the lien was intended to be reduced as the $20b fund is satisfied. Bad news for other creditors though if that means another Chrysler two step
We love you Tyler, but for goodness sake save your voice for worthwhile issues. you are beginning to sound like the boy who cried wolf.
We need a voice like yours, but it needs to stay credible.
How can a company the size and type of BP really need a measly $5B for operating cash, even for some smaller settlements? Are they in that poor of a liquidity situation? Or is this really a sort of pre-bankruptcy planning maneuver, hoping to find some lenders dumb enough to think that their loan will be repaid in full? I'm tending towards the latter.
any chance this has less to do with liquidity than it does with BPs financing needs from that little mess in the GoM?
raising debt instead of selling assets = ECONOMIC GROWTH BITCHES!!!
hoorraaay for the catastrophe makers
rescuing the economy
poor fucking asshole BP and banker f**ktards
so misunderstood
BP probably needs the $5 billion to pay the investment banking fees. Since all the banks are TBTF, the loans, no matter what the amount, are essentially risk free in any event. There's your credit decision. That's how the deal gets done.
AND NOW FOR A MESSAGE FROM CONGRESSMAN JOE BARTON:
http://williambanzai7.blogspot.com/2010/06/joe-barton-original-gop-douch...
Let the witch hunt continue. Persecute the herectical, evil, non US company. The hypocrisy makes me vomit...
Agreed!
They can't stand up to evil domestic oligarchs like GS, so they take out their frustration on foreign firms from friendly countries. What happened on that oil rig was a tragic accident. Unlike the day light robbery that was orchestrated by GS.
BP -> one tragic accident -> Bankruptcy
GS -> cheat/steal/lie and destroy the US economy -> get Gov money -> Pay massive bonuses
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