Kaminsky's Call: BP Bonds to the Rescue?


Amid the constant bloviating out of Washington yesterday came some real news on the BP front courtesy of some excellent reporting from my colleague, Kate Kelly: BP could come to market with a massive bond offeringas early as next week.

For those thinking of buying BP stock, my call to action could not be more timely: Wait and see how that potential bond sale goes before doing anything.

Based on my experience in the capital markets, I believe BP may have to pay lenders as much as 2.5 percent more than it typically does on similar bond issues in order to attract interest.

Additionally, I wonder if any potential deal would need to include provisions that force BP to pay creditors more if its debt were to be downgraded.

Some are speculating a deal near $20 billion.

Don't get me wrong. BP brass doesn't view this as some type of "opportunistic financing," where they're taking advantage of low rates. This is a dose of bad medicine intended to shore up its balance sheet in the face of an overwhelming predicament.

Still, if this deal is a success, long-term investors can begin to assign some type of value to BP stock, and the uncertainty that surrounds the company today will begin to fade.

Only then will I like the idea of buying the BP.

BP's spokesperson had no comment.

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Gary Kaminsky does not hold any equity positions.

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