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

16th Jun 2010 23:03

THE NEWS BP PLC (BP, BP.LN) said it won't issue further dividends this year and agreed to put $20 billion in an independently administered oil-spill escrow fund to help pay for claims as a result of the Gulf oil disaster. BP announced the moves after Chairman Carl-Henric Svanberg, Chief Executive Tony Hayward and other company executives met at the White House with President Barack Obama, who said BP also will set aside $100 million for those workers who lost jobs due to the drilling moratorium. THE FUND In addition to not paying dividends this year, BP said it will sell off $10 billion in assets and reduce capital expenditures by at least $4 billion to build up the $20 billion fund over the next three and a half years. The company also added it's able to generate $30 billion in cash flow from its global operations above and beyond the oil spill costs. However, BP could face liabilities beyond the $20 billion. The company said it will not have clarity on its ultimate liabilities and penalties until the well is capped. BP had pushed but failed during the talks for a cap on liabilities in return for agreeing to the fund. FEINBERG EXPECTED TO BE TABBED The White House is expected to name pay czar Kenneth Feinberg the fund's independent administrator. Feinberg previously handled compensation claims for 9/11 victims. He oversees executive compensation at the country's biggest financial firms. BP'S SECOND SYSTEM 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. The company said it hopes to have two additional ships in place by the end of June that will allow it to capture 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 closed up 1.4% to $31.85, after dropping more than 4% earlier. BP closed down 1.5% in London. The yield on BP's most-traded bond, a five-year note due in 2013, fell to 7.771% Wednesday from 8.353% on Tuesday, according to data provider MarketAxess. Before news of the dividend and cleanup fund, the yield on that bond had leapt as high as 9.865%. 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. But after the company announced the fund and its dividend cut, the CDS fell to 545 basis points. DOW JONES COVERAGE For more coverage of the oil spill, please search under the code BP. -BP's Oil Trading Hums Along Despite Deteriorating Credit Risk -BP Adviser: BP's $100 Mln Fund Payment Is A 'Goodwill Gesture' -Obama: Meeting With BP 'Constructive', Company Agrees To $20B Fund -WSJ: White House, BP Agree to $20 billion Gulf Cleanup Fund -BP Slashes Spending To Build $20B Gulf Oil Spill Fund -BP Dividend Cut Hurts Pensioners, Helps Options Trader Profit -BP's $20 Bln Fund Deal Doesn't Erase Political Risk -WSJ: BP Could Face Liabilities Beyond $20B Paid To Fund -BP Bonds Rally On Dividend Cut And Creation Of Cleanup Fund -UK Energy Secretary: BP Deal Shows Company Acting Responsibly -New BP Oil-Spill Fund To Have Little Impact On Insurers -Citi, Fannie Provide Relief For Some Gulf Homeowners -BP CFO:No Clarity On Financial Position Until Leak Under Control -BP Exec: Company Expects To Exceed $75 Million Liability Cap -Contract With BP Has Clause To Limit Anadarko Liability-Source -BP Could Face Higher Fines As US Raises Spill Estimates -BP WATCH: BP Shares Pare Declines After Agreement For $20B Fund -BP Starts Collecting Oil With Second Containment System -WSJ: 'Pay Czar' Feinberg To Oversee BP Spill-Claims Fund -BP Bolsters Liquidity With Loan For Oil Spill Claims -Sources -BP Must Be Given "Certainty" On Liabilities - UK PM -Europe Shrugs Off BofA Ban On Long-Term Trade With BP (END) Dow Jones Newswires June 16, 2010 18:03 ET (22:03 GMT)