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

[Ed Barrow]

Source: 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.

The rising risk implied by credit-default swaps is up from 7 percent a month ago, according to the International Swaps and Derivatives Association’s standard model. BP swaps climbed 68 basis points yesterday to a record close of 506 basis points, CMA DataVision prices show. Investors are demanding 800 basis points more in yield to own BP debt due next year rather than Treasuries.

Pressure is building on BP with Chairman Carl-Henric Svanberg called to a meeting at the White House today to discuss setting up an escrow account to pay residents for damages from the accident. BP, which had $27.7 billion in cash flow from operations in 2009, was cut six levels to BBB from AA by Fitch Ratings because of mounting costs from the well that’s spewed crude into the Gulf of Mexico for eight weeks.

“There’s still so much uncertainty as to what ultimately the liability is and what the government is going to do,” said Jason Chen, a partner and head of research at hedge fund Sancus Capital Management in New York, founded in August by former JPMorgan Chase & Co. traders.


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=arh44k8nUURc&pos=3

[Imajika]

1. BP is finished...

There is simply no way they survive this. The final toll here probably won't be in the tens of billions of dollars, it will be in the hundreds of billions.

This may sound crazy right now, but my suspicion is by the time this is all said and done the damages and cleanup will approach a trillion dollars. The US taxpayer will end up having to pay for most of it.

[glinda]

2. That or completely confiscate every asset from every investor possible.

Sad thing is it will not bring back the dead wildlife.

[PJPhreak]

4. Much less the 11 Rigworkers. nt

[avaistheone1]

5. I just hope the US gets every dollar we need from BP to clean up

the and restore what can be restored of the environment, and that BP pays for the economic losses they have caused to the Gulf region.

All this needs to happen BEFORE BP defaults.

[whopis01]

11. I'm not sure if you numbers are accurate - but your last sentence is spot on. n/t

[Tansy_Gold]

3. This is almost as disgusting and destructive to the economy

as the spill itself.

That there are vultures BETTING on and HOPING TO MAKE A PROFIT ON the catastrophe that has killed BP. What ghouls.




TG

[Hydra]

6. Capitalism at its best

Yay for us, huh?

[Nihil]

9. Some f*ckers were betting on the first species to be made extinct by the event ...

http://www.nytimes.com/gwire/2010/05/24/24greenwire-website-offers-betting-on-spill-related-extinc-84733.html

http://www.onlinecasinoreports.com/news/theheadlines/2010/5/25/oil-spill-effects-species-extinction-bets.php


I'm not going to link to their site (i.e., those bastards at PaddyPower)
but I've just checked it and yes, the reports are true:

Kemp's Ridley Turtle 4/5
Loggerhead Turtle 12/1
Gulf Sturgeon 20/1
Bluefin Tuna 6/4
Sperm Whale 16/1
Elkhorn Coral 20/1
Leatherback Sea Turtle 8/1
Blue Whale 16/1
Smalltooth Sawfish 20/1
Brown Pelicans 8/1

:mad:

> That there are vultures BETTING on and HOPING TO MAKE A PROFIT ON
> the catastrophe that has killed BP. What ghouls.

You want "ghouls"? I give you another set. There are no words for times like this.

[Tansy_Gold]

10. And Tony fucking Hayward wants his life back?

I am a staunch opponent of the death penalty and I will not allow even my outrage over the Gulf to change my mind on that.

But I am not opposed to stripping Tony Hayward, his wife if he has one, his children if he has any, of every red cent, every copper penny, every tin shilling the man has to his name. And then, when he has faced abject poverty in the face with no hope of relief, setting him adrift in an open boat in the middle of the Gulf of Mexico. Not forever, and not to starve or fry to death, but just long enough for him to be completely isolated from all the forces that influence him to deny the reality of what he and his minions have done.


Fuck you, Tony Hayward, and all the nameless rich bastards like you at BP and Shell and ExxonMobil and ConocoPhillips and all the rest. Fuck you to hell and back.



Tansy Gold

[Hydra]

7. Ok, so they go under, as predicted

Will all their money disappear into investor or CEO pockets, and we're stuck with the bill?

[dipsydoodle]

8. Will all their money disappear into investor or CEO pockets ?

Grow up - its not an American company.