BP PLC’s agreement to cut three-quarters of dividend payments and set up a $20 billion fund for oil-spill victims removed the energy producer from a four-hour stint among companies the bond market labels as distressed.
BP’s $750 million of 1.55% notes due 2011 were trading at 94.75 cents on the dollar Thursday after tumbling as low as 87.9 cents Wednesday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The cost of protecting BP’s debt against default for one year has declined to 631.4 basis points after climbing to as high as 1,075 basis points on Wednesday, CMA DataVision prices show.
Spreads on bonds and default swaps tightened after BP officials slashed the $10 billion-a-year dividend and agreed to create an escrow fund to pay damages for the biggest oil spill in American history following a meeting with President Barack Obama. Its bonds still traded at levels similar to junk-rated debt in the U.S. on Wednesday, at least seven steps below the AA- rating from Standard & Poor’s.
