BP Oil Spill Loan Rises To $7B As More Banks Show Support-Source

18th Jun 2010 14:42

By Carol Dean Of DOW JONES NEWSWIRES LONDON (Dow Jones)--BP PLC's (BP) standby loan has now risen to $7 billion as more banks join the group of lenders supporting the company against possible claims related to the oil spill in the Gulf of Mexico, a person familiar with the situation said Friday. BP said during its investor conference on June 4 that this facility amounted to $5.25 billion. The facility was initially provided by five lenders but that has now increased to seven as more banks have come on board. Each bank is providing around $1 billion to the facility, the person said. BP is arranging the financing on a bilateral basis. So far the seven banks are likely to comprise Barclay's, BNP Paribas, Citigroup, Banco Santander, HSBC, Royal Bank of Canada and Royal Bank of Scotland, the person said. The standby loan has a one-year maturity with a one-year extension option, people familiar with the situation said. BP wasn't immediately available for comment. As previously reported by Dow Jones, this financing enables BP to bolster it balance sheet against future oil spill claims. Another person familiar with the situation said that a number of investment banks are reviewing funding options for BP. Earlier this week reports said that BP had hired Goldman Sachs Group Inc. (GS), private-equity firm Blackstone Group LP (BX) and an investment bank as advisers to help it ward off takeover attempts. BP Wednesday struck a deal with the Obama administration to set aside $20 billion to cover Gulf of Mexico oil spill claims. The company will pay $3 billion into an escrow account in the third quarter of this year and another $2 billion in the fourth quarter. This will be followed by payments of $1.25 billion per quarter until the $20 billion has been fully paid. Liabilities aren't capped at $20 billion. Ratings agency Moody's Investors Service Friday downgraded BP credit rating three notches as costs and exposure to litigation from the Gulf of Mexico oil spill continue to mount. Moody's lowered BP's senior unsecured ratings to A2 from Aa2. Standard & Poor's Ratings Services Thursday lowered its rating on BP by two notches, its second downgrade on the oil giant this month, while Fitch Ratings downgraded BP long-term debt six notches to just above junk level Tuesday. -By Carol Dean, Dow Jones Newswires; 44 (0) 207 842 9306; [email protected] (END) Dow Jones Newswires June 18, 2010 09:42 ET (13:42 GMT)