Moody’s again cuts BP ratings on worsening US oil spill impact

18 June 2010 14:38  [Source: ICIS news]

BPTORONTO (ICIS news)--Moody’s on Friday cut its ratings for BP by several notches, citing the company’s continued failure to bring the US Gulf coast oil spill under control amid mounting costs and claims for damages.

The credit ratings agency – which had already downgraded BP on 3 June – said all its BP ratings remained on review for possible further downgrades.

Meanwhile, US analysts and media accused BP chief executive Tony Hayward of essentially “stonewalling” Thursday’s US congressional panel into the accident by refusing to acknowledge personal or corporate responsibility for possible safety failures for the blow-out which still spills an estimated 35,000 to 60,000 bbl/day of oil into the Gulf.

Others, however, pointed out that previous US administrations and Congress were at least in part to blame for the disaster. One Congressman - Republican Joe Barton from Texas - even apologised to Hayward, saying that US demands on BP amounted to a "shake-down" of the company. Barton later retracted his apology.

Moody’s, for its part, said it believed that costs for containment, clean-up, litigation and fines were likely to be higher than it had previously expected, in view of the widespread and continuing physical and economic damage.

BP’s agreement with the US government for a $20bn (€16bn) fund to satisfy legitimate claims from the spill was “mildly positive development,” Moody’s said.

However, that fund would not cap in any way BP’s potential liabilities, the agency warned. Rather, uncertainty over the ultimate cost for massive litigation claims and other contingent liabilities would be an overhang on BP's creditworthiness for years to come, it said.

Moody’s downgraded the senior unsecured ratings of BP plc and of all long-term debt securities issued by its subsidiaries and guaranteed by BP by three notches to A2 from Aa2.

At the same time, it also downgraded the senior unsecured issuer rating of BP Finance plc by three notches to A3 from Aa3, and it cut the senior unsecured issuer rating of BP Corporation North America Inc by four notches to Baa1 from Aa3.

On 3 June, Moody’s had downgraded BP to Aa2, from Aa1.

Earlier this week, ratings agency Fitch also downgraded its ratings for BP by several notches.

The company's share price was up 2.4% at 368.50 pence at 13:11GMT in London.

($1 = €0.81)

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By: Stefan Baumgarten
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