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.

Citigroup (NYSE:C), BNP, Barclays (NYSE:BCS), RBS (NYSE:RBS) Leading BP (NYSE:BP) $3 Billion Bond Issuance

BP Capital Markets PLC, the funding unit of BP Plc (NYSE:BP), is close to issuing about $3 billion in bonds, led by Citigroup (NYSE:C), BNP Paribas, Barclays Capital (NYSE:BCS), Royal Bank of Scotland (NYSE:RBS) and Mizuho Securities USA Inc.

The bonds will be 5- and 10-year bonds sold in U.S. dollars.

Pricing of the bonds will be somewhere in the low to mid 200 basis points range over Treasuries, with tranches split close to equal.

BP PLC, the parent company, will be guaranteeing the bonds, which are projected to be rated A2 by Moody's Investors Service (NYSE:MC) and A by Standard & Poor's.

In a filing with the Securities and Exchange Commission BP said they will use the capital to pay for existing debt and other general corporate purposes.

A spokesman for BP said the bond issuance isn't specifically related to the BP oil spill and is part of normal financial management of the company.