BP credit rating slashed
Oil giant reeling from second downgrade in two weeks
Oil giant BP reeled under another blow yesterday, after a ratings agency slashed its debt to near-junk status amid fears over the catastrophic impact of the Gulf of Mexico spill.
Fitch's second downgrade for the under-fire firm in less than two weeks leaves the blue-chip stock rated at BBB, the agency's lowest investment grade.
The move came after scientists said far more oil was spewing into the Gulf than first thought and US politicians called on BP to place up to $20bn (£13.5bn) into a special account to deal with claims.
Fitch said the company's estimate of clean-up and claims had soared to up to $6bn (£4.1bn), while the agency said fines could be as high as $8bn (£5.4bn).
Meanwhile, a US presidential spokesman yesterday said the US government was ready to take over the handling of oil spill damage claims from BP if the British company doesn't set up an "independent entity" to do it.
Chief executive Tony Hayward has insisted that BP is strong enough to weather the storm, but Fitch said the increased risk of early claim payments would put pressure on BP and hamper access to capital markets.
According to the agency, BP has $5bn in cash (£3.4bn) as well as a total of $10.5bn (£7.1bn) in committed and stand-by bank lines.
The company's board also met on Monday to discuss whether to cut the dividend for the first time since August 1992.
Fitch analyst Jeffery Woodruff said he would be "surprised" if the firm did not suspend payments until the impact of the spill became clearer.
BP should avoid the worst-case scenarios of insolvency or restructuring, but Fitch added BP could be cut to junk status if claims and costs soar higher still.
Shares in the firm trod water yesterday after another sell-off on Monday sent the stock down more than 9%.
The firm's shares have now slumped by almost half since the crisis began two months ago, when the Deepwater Horizon rig exploded and sank with the loss of 11 lives.
US president Barack Obama has summoned BP's chairman Carl-Henric Svanberg to the White House today to explain what the company is doing to stop the flow of tens of thousands of barrels of oil, and how it will compensate the thousands of people who have been impacted.
Mr Hayward - who has taken the brunt of the criticism levied at the firm so far and made a series of press blunders - faces a stormy grilling in Congress on Thursday.