i'd think this is pretty significant, and will certainly have an impact on the share price. loading up on debt like this Should warrant additional downgrades, correct?
Should seal the deal on the question: "will they pay dividends next year if i keep holding these shares?"
Should give investors the sense that bp is going to be in the money-repayment business for at least 5 years as they shrink their business.
i think there will be a reaction to this 50 billion news, and not based on theories like where is the real leak or will the relief wells work. question is, will the markets react favorably? will 'they' keep scooping up shares at the pace 'they' have been?
anyone seen anything like this happen with other companies in trouble? what were the subsequent results??
BP is very clearly throwing the equity holders to the dogs to ensure survival.
By the time this is done, their entire North American asset base will have a lien on it.
They are supporting their balance sheet. In this situation, you want to be long the bonds not the equity. Exactly what PIMCO is doing.
"throwing equity holders to the dogs"
see, that's what i would think too. however, we still have longs on this very board talking up this new effort to raise capital via what seems to be Huge new debt as a good thing.
how big is 50 billion compared to their assets? i was thinking something like 30% but maybe i'm wrong. either way, it CAN'T be good- or can it??
exxon execs see the liability being well over 100 billion.... exxon paid 8 billion and that spill involved 36000 people. Bps will affect 4 million minimum. might want to get a calculator. be careful
The reason i sold mine. What will happen if a tropical storm or hurricane comes in before well is capped. The man they picked to head the slush fund is a socialist Dem. the monies going to fly out and they will want more soon. Part of that wealth redistribution. Their will be delution in the raising of the cash.Next year you staying because you think their going to pay 3.36 Dividend not going to happen if returned at all next year it won't be 3.36 more like .50. If you stay atleast buy those options. To the man that discussed GM they wiped out the share holders. G.M will be offered as an IPO with all new share holders. Thats how Obamy rewarded the unions,they kept their jobs,and destroyed those weathy shareholders and bond holders for that matter the Rule of Law means nothing to this socialist President.Good luck to you all, some of my shares were bought when it was Standard Oil of Indiana.
Heres the deal. First off BP could cover $50B in 3.33 years even at worst case earnings level of 15B. Also all of these spill costs come out of EBITDA (pretax and depreciation). The reason they are going to use debt to pay for this is so they can resume investing (CapEx spend) and probably so they can resume the dividend. Yes there will be some interest costs but those are not going to be material maybe $3.5 billion in year 1 at a 7% rate. Thats the real damage to the company from this spill - $3.5b a year in interest and a loan that will be eaten away by inflation. The other thing shorts need to consider is why would these big banks and bond investors like pimco be willing to lend so much money to BP if there was a real concern about bankruptcy. Also why would Obama only ask for 20B and be confident the spill would be down to 90% in 2 weeks? They all have inside info that you don't thats why.
<<The other thing shorts need to consider is why would these big banks and bond investors like pimco be willing to lend so much money to BP if there was a real concern about bankruptcy>>
Actually, purchasing bonds and providing loans is the SAFE way to invest in BP, because they will be secured by assets. This puts them at the front of the line if it goes BK. So yes, we have though of that. Here's a question for you ? Why have NO US banks shown any interest in buying BP bonds are providing loans - not one.
The bonds are estimated to go off at 8-9% based on the latest credit downgrades. So at $10B that's $800M - 900M in annual interest payments alone. Expect the loans to be at a similar interest rate (assuming further credit downgrades don't come). I don't know whether the assets they are selling are cash flow positive or negative.
I'm sure BP would love to get top dollar for their assets. However, that is not their current goal. Their goal is to raise cash. If they can do so be selling off money loosing assets... how great is that ? The refinery I work at should be worth a couple of billion, however, if they can sell a loosing asset for one billon dollars... they will and it will be a win win for them at this point in time.
still, why is it that the 50 bln news item is sort of sneaking past..?
what does it need to be before people are saying "wow that's BAD news for their shares"- 100 billion?
now come on folks, analyze the newest potential debt numbers and let's hear pps estimates based on those figures.. plus sentiment- is the move in principle a good one for shareholders?
longs and shorts alike seem to be more or less ignoring this and i'm not sure why...