David Cameron ready to bail-out BP

Financial Times

Shares in BP lost further ground on Thursday on growing concern about the impact of the Gulf of Mexico oil spill on the company’s

UK Prime Minister, David Cameron

financial health.

The potential cost of the crisis, and fresh fears over whether BP will pay its dividend, sent the shares tumbling 11 per cent at the open, The stock, which on Wednesday closed below 400p for the first time since October 2008, recovered some of those losses to stand 3.2 per cent lower at 380p by midday in London on Thursday.

But as US trading started, the stock was under more pressure, losing 7.3 per cent to 361.6p, even as its American Depositary Receipts, instruments that allow US investors exposure to its shares without a full listing on an exchange there, recovered from 14-year lows in a sell-off over the previous session. As New York markets opened, BP’s ADRs rose from their Wednesday close of $29.20 to $32.14.

The fall in the share price followed a near-16 per cent drop in New York overnight for the company’s American Depositary Receipts, which have now halved since the accident on April 20.

The cost of insuring BP debt against default also rose sharply, with five-year credit default swaps quoted at 510 basis points at one stage, having closed at 386 basis points on Wednesday. That means it would cost $510,000 a year over five years to protect $10m of BP bonds from default. At these levels, the market is indicating a “junk” rating on BP’s debt.

BP said in a statement on Thursday that it was “not aware of any reason” for the sharp fall in its ADRs. It said that its “strong and valuable” asset base , and its strong cash inflows and outflows, “gives us significant capacity and flexibility in dealing with the cost of responding to the incident, the environmental remediation and the payment of legitimate claims.which justifies this share price movement.“

The severe market reaction came as UK industry expressed alarm at the “inappropriate” and increasingly aggressive rhetoric being deployed against BP by Barack Obama, US president, and warned that the attacks on the oil company could damage transatlantic relations.

Adopting a more emollient tone, David Cameron, UK prime minister, said on Thursday that the British government stood ready to help BP with its clean-up efforts and that he completely understood US frustration. Speaking on a visit to Kabul, he said he would be discussing the “environmental catastrophe” with President Obama, with whom he is due to talk on the telephone over the weekend.

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About Luis Miranda
The Real Agenda is an independent publication. It does not take money from Corporations, Foundations or Non-Governmental Organizations. It provides news reports in three languages: English, Spanish and Portuguese to reach a larger group of readers. Our news are not guided by any ideological, political or religious interest, which allows us to keep our integrity towards the readers.

One Response to David Cameron ready to bail-out BP

  1. Peter Reynolds says:

    http://peterreynolds.wordpress.com/2010/06/10/obama-stoops-to-bully/

    I’m very disappointed in Obama. The renaming of BP as British Petroleum is blatant racism!