A short-term loan is good for unexpected expenses such as car repair, a crown at the dentist or a traffic ticket. But when you are responsible for the 2010 oil spill in the Gulf of Mexico, a short-term loan comes in handy — in spades. BP is talking to some banks to raise about $ 5 billion in short-term loans to help finance liabilities arising from the oil spill in the Gulf of Mexico, the Financial Times newspaper reported Thursday. By the end of last week BP had already raised about $ 20 billion in cash and credit to tackle costs from the spill.
Short-term loans are easy — unless you are BP
For most, getting a unsecured loans is easy. With just a little online research some fairly reasonable rates can be found, but if you run an oil business with a criminally negligent sales record that’s trying to buy its way out of an epic economic and environmental disaster it’s a little tougher. According to Investment Week, in seeking its $ 5 billion in short-term loans, BP is having to pay more than commonly charged by banks in margins and fees, people close to the transactions said. They noted that the banks are holding the cards in this deal. Soon, BP is bound to be desperate for cash. As the undersea gusher continues unabated, banks seem to be much more concerned over the potential size of BP’s liabilities — so they are going to hold the oil company over a barrel.
Payday cash being looked for by BP
A secured loans or a payday loan provides the cash till payday most individuals have to stop things like missing a credit card payment, preventing a bank overdraft fee, or simply getting the car out of the shop to get to work. BP has bigger issues on its hands. To solve it, it was reported by Reuters that BP is looking at various debt-financing opportunities, which consist of extending bank credit lines as much as $ 7 billion. Earlier this year, the oil spill company looked like they were considering a corporate bond offering and additional asset sales. But now those ideas are on hold. BP has said it has enough cash resources to meet oil spill cleanup costs without having to turn to these possibilities.
BP will need more than short term loan
For most people a short term loan or pay day loans for cash until payday loan solves their financial dilemma and they move on. BP costs are going to continue to mount higher. The Street reports that BP said this week the costs of cleaning up the oil spill in the Gulf of Mexico had reached $ 2.65 billion. This figure is already more than $ 300 million more than its estimate from the week before. On June 16, BP agreed with the Obama administration to create a $ 20 billion fund to compensate for the economic damage being wrought by the oil spill.
BP needs to discover a way to get debt management
It’s not known whether $ 20 billion will be enough. According to the Associated Press, on July 1 BP’s oil spill became the largest-ever in the Gulf of Mexico. Its damaged oil well has been pumping out oil for about two and a half months now, surpassed the formerly record-setting 140 million gallons spilled by the Ixtoc I spill near Mexico’s coast from 1979 to 1980. It is doubtful that BP’s short term loan strategy will be even close to enough to deal with the long-term debt that lies ahead for the Gulf of Mexico.
Discover more details:
Investment week
investmentweek.co.uk/investment-week/news/1720119/bp-raise-funds-papers
Reuters
reuters.com/article/idUSTRE65G44C20100617?type=ousivMolt
The Street
thestreet.com/story/10796965/1/bp-in-short-term-finance-talks.html?cm_ven=GOOGLEFI
This post has one comment
We need a comment from the Coast Guard Rear Admiral Mary Landry. Landry’s done this before—she oversaw the 2003 spill in Buzzards Bay, Massachussets . Then, as now, her initial reports of the spill total were way off. Landry, a Coast Guard rear admiral, has gone from taking reporters’ questions at the White House to giving reporters tours of the damage, but there are also reports that the Coast Guard is keeping reporters and photographers from getting a full picture – and doing so at the behest of BP. (The Coast Guard says they are accommodating as many media requests as they can; Landry hasn’t commented). We have got to ask how the response to the Gulf of Mexico spill compares to the 2003 Bouchard B 120 oil spill in Buzzards Bay,Massaacusetts? Two things come to mind. First the U.S.Court of appeals never allowed the state of Massachusetts to enforce the Massachusetts Oil Spill Prevention Act of 2004. The Coast Guard appealed the rules because of an intercoastal turf war leaving the state with no new laws to protect the bay. Second the residential property claims of thousands of residents have been tied up in the Massachusetts court system for the past eight years. How will residential property owners around the gulf have to wait? On April 27, 2003, eight years ago the Bouchard Barge B-120 hit an obstacle in Buzzards Bay, Massachusetts creating a 12-foot rupture in its hull and discharging an estimated 100,000 gallons of No. 6 oil.
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