BP Swaps Rise to Record at 35% Odds of Default: Credit Markets

BP Swaps Rise to Record at 35% Odds of Default: Credit Markets

www.bloomberg.com

June 16 (Bloomberg) -- Credit investors are pricing in an almost 35 percent chance BP Plc will default within five years as it tangles with the Obama administration over cleanup costs and claims for the biggest oil spill in U.S. history.

BP’s $750 million of 1.55 percent notes due in 2011 dropped 2.1 cents to 92.25 cents on the dollar yesterday, the lowest on record,

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You would expect some movement on BP credit, but not this much given their earnings. There is a cap on damages and clearly BP has indicated that they will pay beyond that cap, but they will not default on their credit in order to pay reparations for the GOF clean-up.

My little knowledge of UK law is that it would be illegal for BP to default on their credit or declare bankrupcy when in fact there is a cap in place and the matter could be avoided.

Yesterday it is announced that BP has just hired Goldman Sachs to assist with the financing of the clean-up.

My guess? Goldman is doing one of two things, driving the default swaps down to create the appearance of financial instability for BP so that they can claim they can not pay the amount the administration, or they are buying tons of the swaps, essentially shorting their client and will then assist them with their ultimate insolvency and make several billion.

Either way, these spreads don't make sense. Not with the legal standing BP has in this matter since they actually have the stronger hand legally than the administration, not with a weak US president.

Something here is going on

www.bloomberg.com
(visit the link for the full news article)

Originally posted by dolphinfan
Something here is going on

ur right something is going on here
but it's not bankruptcy

it's called driving a stock down in price
to force a hostile take-over

the take-over point ????

$25.00 a share

BP has too many assets to go
bankrupt. The cash flow is the
problem. If their cash is tied
up in law suits, they have no
working capital for operations.

From what I hear Obama has demanded
a $20B fund be set up
and all BP has added is $7.4B
which is way short.