BP credit rating cut in new blow

BP suffered a fresh blow yesterday after two of the world’s three largest credit rating agencies downgraded the group’s debt.

Fitch and Moody’s both slashed BP’s rating on fears that the company would be significantly impacted by the mountainous legal and clean-up costs coming from the Gulf of Mexico oil spill.

Moody’s lowered its senior unsecured rating of the oil giant to Aa2 from Aa1 and said the spill represents a further setback to BP’s ability to overcome past operational issues.

“The downgrade of BP’s ratings reflects Fitch’s opinion that risks to both BP’s business and financial profile continue to increase following the Deepwater Horizon accident in the Gulf of Mexico,” said Fitch yesterday, which lowered BP from AA+ to AA.

Fitch has threatened that it could further downgrade BP if the rate of oil leaking into the Gulf continues to increase and the costs reach $5bn (£3.4bn).

A spokesperson for BP said that AA was still a very strong rating and said that the group does not have a specific ratings target. He said: “We look to maintain a strong balance sheet as set out in our financial framework. We regard the framework as prudent and have no plans to change it.”

BP shares edged up 0.58 per cent yesterday to close at 432.25p.

The rise reflected investor relief after the firm successfully managed to cut a pipe leading from the damaged blown out preventer moving it one step closer to redirecting the oil spill.

Hayward called the move a “milestone” and added that the company will meet obligations to all stakeholders.

Shareholders and investors are expecting to quiz Hayward later this afternoon on whether the company will cut its dividend payment in half or suspend the payment altogether.

The group has pledged $360m to construct six barrier islands in a bid to reduce the impact of oil meeting the Louisiana coast.

However, US President Obama said yesterday BP should have acted quicker to the anger he expressed over the 20 April explosion of the Deepwater Horizon rig. Since then the damaged well has leaked some 19,000 barrels of oil a day into the Gulf of Mexico.

The President said: “Well, they have felt the anger. But what I haven’t seen as much as I’d like is a rapid response.”

Obama has given BP until 1 July to pay a $69m bill related to the spill, an administration official said yesterday. The $69m figure represents 75 per cent of government costs to date, the official said.