AT A GLANCE: BP Agrees To $20B Claims Fund In Obama Meeting

16th Jun 2010 20:17

THE NEWS BP PLC (BP, BP.LN) Chairman Carl-Henric Svanberg, Chief Executive Tony Hayward and other company executives met with President Barack Obama and Vice President Joe Biden at the White House. Both Obama and the company said that they had constructive talks. BP agreed to put $20 billion in an independently administered oil-spill escrow fund, and the president said BP will set aside $100 million for those workers who lost jobs due to the drilling moratorium. Meanwhile, the White House is expected to name pay czar Kenneth Feinberg the fund's independent administrator. The cost of insuring BP-issued debt set all-time highs following Obama's Oval Office speech Tuesday and several ratings downgrades. A second BP containment system, the Q4000, has begun collecting oil. The vessel will enable BP to capture between 20,000 and 28,000 barrels of oil a day in total from the leaking well. THE FUND As the massive offshore oil spill continues to gush, BP executives and the Obama administration have agreed on the $20 billion, White House officials said. Obama had said that BP should establish a restitution fund with "whatever resources are required." BP said it will not pay dividends this year. But BP could face liabilities beyond the $20 billion because higher flow-rate estimates are likely to translate into higher fines. BP had pushed but failed during the talks for a cap on liabilities in return for agreeing to the fund. BP said it plans to build up the $20 billion claim fund by contributing $3 billion the third quarter, and $2 billion in the fourth quarter. Feinberg, the person named to oversee the fund, previously handled compensation claims for 9/11 victims. He oversees executive compensation at the country's biggest financial firms. OBAMA'S SPEECH In Tuesday's speech, Obama said that the gusher was coming under control, and that BP would be capturing 90% of the flow "in the coming days and weeks." But on Tuesday, scientists monitoring the damaged well raised their estimate of the amount of oil spilling into the Gulf to a range of 35,000 to 60,000 barrels a day from 20,000 to 40,000 barrels. BP'S SECOND SYSTEM BP said oil and gas from the second containment system reached the Q4000 early Wednesday. The company said it hopes to have two additional ships in place by the end of June that will bring the total volume of oil it can capture from the leaking well to between 40,000 and 53,000 barrels a day. MARKET REACTION BP's stock price mostly rebounded from earlier lows in the U.S. but slid more in Europe. The company's American depositary shares recently rose 4% to $32.64, after dropping more than 4% earlier. BP closed down 1.5% in London. BP's five-year credit default swaps, or CDS, jumped as much as 26% Wednesday, to 625 basis points from 495 basis points Tuesday, according to data provider Markit. This means investors would have had to pay $625,000 annually to protect $10 million of the company's debt for five years, compared with $495,000 on Tuesday and $424,000 on Monday. DOW JONES COVERAGE For more coverage of the oil spill, please search under the code BP. =Obama: Meeting With BP 'Constructive', Company Agrees To $20B Fund =WSJ: BP Could Face Liabilities Beyond $20B Paid To Fund =BP Could Face Higher Fines As US Raises Spill Estimates =BP WATCH: BP Shares Pare Declines After Agreement For $20B Fund =2nd UPDATE: Liability And Settlement Whipsaw BP's Debt Swaps =WSJ: White House And BP Still In Talks On Ceiling Of BP Costs =2nd UPDATE: BP Starts Collecting Oil With Second Containment System =WSJ: White House, BP Agree to $20 billion Gulf Cleanup Fund. =WSJ: 'Pay Czar' Feinberg To Oversee BP Spill-Claims Fund =BP Bolsters Liquidity With Loan For Oil Spill Claims -Sources =Cost Of Protecting BP's Debt Soars To Highest Level Ever =BP Executives Arrive At White House For Talks With Obama =UPDATE:BP Unlikely To Have To Sell Assets To Fund Spill-Fitch =UPDATE: BP Must Be Given "Certainty" On Liabilities - UK PM =Europe Shrugs Off BofA Ban On Long-Term Trade With BP =Obama Aide: Govt To Use Every Device To Make BP Pay For Cleanup (END) Dow Jones Newswires June 16, 2010 15:17 ET (19:17 GMT)