Fears Of Seepage At BP's Well Drive Up Risk Premiums, CDSs

19th Jul 2010 17:25

By Katy Burne Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The cost to insure debt issued by BP (BP.LN, BP) rose 7.2% Monday morning after U.S. authorities expressed concerns about possible seepage on the seabed near the site of the Macondo oil well, where BP is testing its containment cap. Insurance against nonpayment or default on the U.K. oil giant's debt, sold in the form of credit default swaps, rose to 368.5 basis points from 343.5 basis points at Friday's close. That is equivalent to $368,500 per year to cover $10 million of debt for five years, according to CMA DataVision data, and represents a rise of $25,000 a year. BP bonds, meanwhile, fell in secondary trading. The trend was most evident in the company's 3.875% bonds due March 2015, where risk premiums above super-safe Treasurys rose to 407 basis points Monday morning from 377 basis points on Friday. The price of the note fell to 92.44 for a yield of 5.756% from 93.594 and yield of 5.456% Friday, according to MarketAxess figures. Prices move inversely to yields. Fresh fears about BP's ability to contain the disaster also hit oil and gas credits related to the spill. Credit default swaps on Transocean Ltd. (RIG), which operated the drilling rig that burned and sank, moved to 406 basis points from 378.5 basis points; and CDSs on Anadarko Petroleum Corp. (APC), which has a 25% stake in the oil field, deteriorated to 437.5 basis points from 413.5 Friday. The price of Transocean's 5.250% bonds due March 2013 fell to 98.875 from 99 Friday, to yield 5.711% instead of 5.658%. Meanwhile, CDSs on Halliburton Co. (HAL), which had been hired to temporarily seal the well before the explosion and fire, were flat at 144 basis points after the company reported better-than-expected second-quarter earnings before the stock market opened. -By Katy Burne, Dow Jones Newswires; 212-416-3084; [email protected] (END) Dow Jones Newswires July 19, 2010 12:25 ET (16:25 GMT)