BP: Bankrupt Petroleum?
The fear that the gulf oil spill will force BP into bankruptcy swept the markets Wednesday afternoon.
BP (BP) shares plunged 16% in frenetic trading — nine times the oil company’s average daily volume — amid speculation that a bankruptcy filing is at hand.
The cost of insuring against a default on BP debt surged 48% to a new high, CMA said. It now costs $382,000 annually to insure $10 million worth of BP debt against a default for five years. That’s more than triple the going rate last month.
One oft-cited driver of Wednesday’s action was an interview by Fortune’s Nin-Hai Tseng of oil guru Matt Simmons, who said he believed the company would be bankrupt in a month as it faces mounting cleanup costs and legal exposure.
Others worried more mundanely, and perhaps more plausibly, that President Obama’s pledge to kick ass at BP simply means the firm’s rich dividend won’t be paid.
The selloff, after all, comes after a coalition of nearly 50 lawmakers sent a letter Tuesday to BP chief Tony Hayward, urging him to hold off on dividend payments till the full cost of the oil spill in the Gulf of Mexico is determined.