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[NyTimes] Imagining the Worst in BP’s Future

post #1 of 55
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NYTimes Article
Quote:
It seems unthinkable, even now, that the disastrous oil spill in the Gulf of Mexico could bring down the mighty BP. But investment bankers get paid to think the unthinkable — and that is just what they are doing.

The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees).

Given the plunge in BP’s share price — the company has lost more than a third of its value since Deepwater Horizon blew — some bankers and analysts say BP is starting to look like takeover bait. The question is, who would buy BP, given its enormous potential liabilities?

Shell and Exxon Mobil are both said to be licking their chops. And already, flinty legal minds are dreaming up scenarios in which BP would file a prepackaged bankruptcy and separate the costs of the cleanup — and potentially billions of dollars in legal claims — into a separate corporate entity.

Tony Hayward, BP’s chief executive, has insisted that his giant will weather this storm. BP is indeed a money machine: it turned a profit of nearly $17 billion last year.

“The strength of cash-flow generation in recent quarters has provided us with a balance sheet that allows us to fully take on the responsibility for the Gulf of Mexico response,” Mr. Hayward told employees last Friday.

But that hasn’t stopped the deal crowd from blue-skying potential outcomes. Here is some of the math:

BP’s costs for the cleanup could run as high as $23 billion, according to Credit Suisse. On top of that, BP could face an additional $14 billion in claims from gulf fisherman and the tourism industry. So while conservative estimates put the bill at $15 billion, something approaching $40 billion is not out of the question. After all, little about this spill has turned out as expected.

The company has about $12 billion in cash and short-term investments, but there is already a debate about whether it should cut its dividend out of fear that it could run out of money. Of course, it could sell assets or seek loans, which in this environment is still not that easy.

But all those numbers don’t account for the greatest possible threat: a jury verdict against BP. Such a verdict might push the cost of the spill into the hundreds of billions. If that happened, even BP might buckle.
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post #2 of 55
They should go under. Spend as much as possibly stopping the leak and then give whatever is left to local southerners in the form of monetary payments or stocks and bonds.
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post #3 of 55
Quote:
Originally Posted by BizzareRide View Post
They should go under. Spend as much as possibly stopping the leak and then give whatever is left to local southerners in the form of monetary payments or stocks and bonds.
this^^
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post #4 of 55
unfortunately we all know it isnt happening
post #5 of 55
Time for the predictions, the prophecies of doom, and the omens.

Either way, BP definitely has not put as much effort as they could into this mess.
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post #6 of 55
Quote:
Originally Posted by BizzareRide View Post
They should go under. Spend as much as possibly stopping the leak and then give whatever is left to local southerners in the form of monetary payments or stocks and bonds.



Quote:
Originally Posted by Banjo-Fuzz View Post
Time for the predictions, the prophecies of doom, and the omens.

Either way, BP definitely has not put as much effort as they could into this mess.
That's debatable.
Edited by johonm333 - 6/8/10 at 6:22pm
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post #7 of 55
Quote:
Originally Posted by BizzareRide View Post
They should go under. Spend as much as possibly stopping the leak and then give whatever is left to local southerners in the form of monetary payments or stocks and bonds.
That is ridiculous. What company or person would forcefully bankrupt its self. Do you know how many people would lose their jobs? You are incredibly selfish.

---

This happened to Exxon and look where they are today. No problems. Once this leek is plugged, the company will be fine. People will forget about it and continue to buy BP gas. Do you think this will actually stop people from buying BP gas? Personally, I would buy stock now while it is cheap and sell it for an enormous profit in a few years when the rebound.
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post #8 of 55
Quote:
Originally Posted by Banjo-Fuzz View Post
Either way, BP definitely has not put as much effort as they could into this mess.
Do you really believe that? You think they like having their liquid gold spilling into the gulf?
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post #9 of 55
This might be a really good investment, I doubt BP will willingly go into bankruptcy. Hopefully a cap is going to be put in place which will stop the leak and if I buy their stock at $25 (if it goes down that low) in a few years I should see more than a 100% return on my investment.
    
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post #10 of 55
Quote:
Originally Posted by procpuarie View Post
That is ridiculous. What company or person would forcefully bankrupt its self. Do you know how many people would lose their jobs? You are incredibly selfish.

---

This happened to Exxon and look where they are today. No problems. Once this leek is plugged, the company will be fine. People will forget about it and continue to buy BP gas. Do you think this will actually stop people from buying BP gas? Personally, I would buy stock now while it is cheap and sell it for an enormous profit in a few years when the rebound.
Yes I am incredibly selfish for wanting the of 10's of thousands of people who make their living by harvesting from the gulf coast to be compensated for; the thousands of business that rely on those 10's of thousands of subsistence farms for lower priced products and the millions that rely on those thousands of business for food and other services

The amount of lively hood lost/well be lost due to this is far greater than the job loss that could arise if BP went under.

Yes, I am incredibly selfish for wanting the lesser of two evils to happen.
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