Cost Of Insuring BP Debt Moves Significantly Wider - CMA

16th Jun 2010 10:02

LONDON (Dow Jones)--The cost of insuring debt issued by BP PLC (BP.LN) climbed significantly higher Wednesday, after U.S. President Barack Obama made a critical speech on BP Tuesday, and ahead of his meeting with the company's chairman later today. In the speech, Obama said the company "must set aside whatever resources are required" to fund the clean-up. At around 0830 GMT, the five-year credit default swap spread on BP was 590 basis points, according to CMA DataVision, meaning it now costs an average of $590,000 a year to insure $10 million of debt issued by the company. On Tuesday, Fitch downgraded the rating on BP by six notches to BBB, the latest in a long line of negative headlines pressuring the company. Evolution Securities analyst Gary Jenkins said he believes that "Moody's and S&P will move their ratings (from Aa2 /AA- and both on watch for downgrade) in the near future." U.S. government officials estimate that between 35,000 and 60,000 barrels of oil per day are spewing from the Macondo well in the Gulf of Mexico. CDS are tradable, over-the-counter derivatives that function like a default insurance contract for corporate debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies. -By Art Patnaude, Dow Jones Newswires; +44 (0) 207 842 9259; [email protected] (END) Dow Jones Newswires June 16, 2010 05:02 ET (09:02 GMT)