Citing oil spill disaster, Moody’s lowers outlook for BP credit rating

By Chris Kahn, AP
Wednesday, May 5, 2010

Moody’s says Gulf spill pressures BP credit rating

NEW YORK — Moody’s Investors Service said Wednesday that BP’s credit rating could face “downward pressure” because of the rig explosion and oil spill in the Gulf of Mexico.

Citing “considerable uncertainty” over BP PLC’s financial liabilities and cleanup costs, Moody’s lowered the outlook for the British oil giant’s credit rating.

Moody’s revised its outlook for Aa1 senior unsecured ratings from “stable” to “negative.”

The London-based company credit ratings agency said it remains impossible at this stage to determine how much the spill will cost BP.

BP operated the well that’s gushing an estimated 210,000 gallons of crude a day into the Gulf. The oil giant could pay billions of dollars in cleanup costs and other expenses related to the spill. It’s also responsible for the government’s bills, and numerous lawsuits have been filed against the company from shrimpers, fishermen and other businesses in the region.

BP’s market value has dropped nearly $29 billion since the April 20 explosion on the Deepwater Horizon rig.

Peter Boockvar, an equity strategist at Miller Tabak, said a drop in BP’s rating tells investors that the company may have a harder time paying off its debts, and that could make it more expensive for BP to raise money. But he cautioned that BP’s credit rating remains at a high investment grade level.

“It’s not really implying distress,” Boockvar said. “It’s not anywhere close to junk.”

Moody’s noted that BP has $25.8 billion of debt. A Moody’s spokesman said it will continue to monitor the company. If BP continues to deal with similar financial uncertainty from the fallout of the oil spill, Moody’s may place BP under review for a downgrade.

YOUR VIEW POINT
NAME : (REQUIRED)
MAIL : (REQUIRED)
will not be displayed
WEBSITE : (OPTIONAL)
YOUR
COMMENT :