home . news & publications . Investment News . BP May Increase Loan Backed by Azerbaijan Crude-Oil Sales to $2.25 Billion

BP May Increase Loan Backed by Azerbaijan Crude-Oil Sales to $2.25 Billion

BP Plc may increase a loan backed by Azerbaijan oil sales to $2.25 billion from a planned $2 billion after the deal drew surplus demand, two people familiar with the matter said.

More than 15 banks joined the deal during syndication and offered to lend more than the initial amount, said the people, who declined to be identified because the transaction is private. The loan is linked to revenue from the Azeri-Chirag- Deepwater Gunashli field off the coast of Azerbaijan, according to an Aug. 16 statement from lenders led by Royal Bank of Scotland Group Plc and Societe Generale SA.

David Nicholas, a London-based spokesman for BP, declined to comment. Standard & Poor’s removed BP’s rating from watch for downgrade today, saying the company should have “sufficient” resources to meet at least $20 billion of costs this year and next relating to the spill in the Gulf of Mexico. BP shares shed 38 percent since the April 20 explosion at the Macondo well that spilled about 4.9 million barrels of crude.

BP, Europe’s second-largest oil company, has an A rating from S&P, the sixth-highest, and an equivalent A2 rating from Moody’s Investors Service.

BP agreed to pay initial interest of 250 basis points more than the London interbank offered rate on the five-year borrowings, rising to 300 basis points after two years and 325 basis points after three years, two people familiar with the deal said Aug. 17. The loans are BP’s first collateralized borrowings.

Credit-default swaps on BP rose 5 basis points to 200, according to prices from data provider CMA at 1:52 p.m. in London. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of investments.

Europe’s second-largest oil company is also borrowing $3 billion backed by income from its Angolan operations, arrangers BNP Paribas SA and Standard Chartered Plc said Aug. 16. That deal will not be increased, a person familiar with the transaction said.

Source: Bloomberg

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