Tuesday, October 5, 2010

Bond Market Likes BP's (NYSE:BP) Bonds, Future

Now that a clearer picture of the liabilities concerning the BP (NYSE:BP) oil crisis has emerged, and things are beginning to settle down for the oil giant, raising capital through bonds has revealed the markets like what they see for the future of the company, and have been snapping up the two bond offerings of the company over the last week.

With bankruptcy appearing to be a non-event going forward, a lot of positive sentiment from the market is now lingering over the company.

This is a global phenomenon, as measured by who has invested in the bonds, as they're from all parts of the world. The $6 billion invested in the bonds sends a clarion consensus that the market believes BP will remain solvent.

It wasn't just that though, as the bonds were highly oversubscribed, suggesting there's a lot of confidence in the future of BP by investors.

In the first offering of $3.5 billion last week, approximately $12 billion in orders were made, giving an idea of the demand for BP debt. On Monday the sale of bonds generated over four times oversubscription.

The conclusion being made by the actions of the market are while the liabilities of BP are enormous, they're more than big enough to pay for them.

One remaining huge factor for BP is whether or not they're designated as grossly negligent concerning the oil spill. If they aren't, at most they would pay a fine of about $4.5 billion. If they are found grossly negligent, that would soar to $17.5 billion. They're in the midst of negotiations with the U.S. government at this time concerning that.

But the billions raised through selling assets, issuing bonds, bank credit lines and the suspension of their dividend has the bond market believing BP can handle whatever comes their way.

No comments:

Post a Comment