Even though BP has tentatively agreed to a $20 billion fund for Gulf oil spill claims, the CEO of Third Avenue Management, David Barse, told CNBC he still has questions, including: Is $20 billion enough, and what standard will be used to distribute those funds?
For that reason, Barse does not recommend buying BP common stock. But if BP uses the debt markets to finance this $20 billion, they would likely have to pay-up a little bit in terms of what a “comparable yield would be for a debt security of a company of that magnitude; and THAT for our credit fund would be interesting,” Barse said.
Barse likens this uncertainty to other value investor attracted investments involved in “sort of similar circumstances, a company called Enron.” Its common stock was “never cheap enough” and “an uncertainty to the very end,” he said.