The new UK Prime Minister David Cameron told Canadian broadcaster CBC, “It is … in all our long-term interests that there is some clarity, some finality, to all of this, so that we don’t at the same time see the destruction of a company that is important for all our interests.”
He raised the possibility that a number of investors have that the huge oil company could enter bankruptcy or be dissolved with its assets sold to outside bidders.BP has bolstered its balance sheet in recent days. The Wall Street Journal reports that “A person familiar with the matter said BP had arranged more than $3 billion in new unsecured bank credit lines in the past week and had picked up $2 billion in cash borrowed against BP’s stake in OAO Rosneft, the state-controlled Russian oil firm, and other assets.”
Concerns about the cost of the clean-up and potential future liabilities pushed BP’s shares down 6% on Friday to their lowest level since 1996–$26.83. That means BP has lost $108 billion of its market capitalization, which now stands at only $84 billion. CNN reported earlier this month that “Eventually, the flood of suits could become too much for BP to handle while the company deals with serious drops in its stock, says Peter Tamposi, an attorney and professor in bankruptcy law at the Franklin Pierce Law Center in New Hampshire.”
Cameron’s comments are likely to roil the market in BP shares again on Monday. When the UK PM talks about the destruction of one of the his nation’s largest companies, some investors are likely to panic. He might have been better off keeping his mouth shut.
Douglas A. McIntyre