Truth is a rare commodity in a crisis.
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BP CEO Tony Hayward
The truth of this is borne out once again today by FT Alphaville's discovery of two statements by top BP executives that the rumors of credit markets and trading partners shutting down business with BP over the summer were accurate. At the time, company representatives as well as other market players were denying the rumors.
As it turns out, it wasn't the rumors that were wrong. It was the denials.
A BBC special program on BP's crisis includes this admission by ex-CEO Tony Hayward.
"Prior to the meeting, the capital markets were effectively closed to BP. We were not able to borrow either short or medium-term debt at all," Hayward says.
And it wasn't just the debt markets. Trading partners were refusing to extend purchase money credit. And Bank of America wouldn't buy from BP at all.
"Word was beginning to circulate externally about the potential going-under of BP. Could it survive this accident? The Bank of America called, it wouldn’t buy crude from us, suppliers were asking for money up front. This was a very unusual environment for BP," Tom Dudley, current CEO of BP, tells the BBC.
I can understand why BP wouldn't have wanted this kind of thing getting out during its worst days last summer. It could have started a pile-on that might have ruined the company. But I have to think that learning of the truth of rumors after the fact has to increase the credibility—and therefore the market power—of rumors. The calm voices urging that all was well have been proven wrong once again.
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