Moody's says it has cut BP debt rating due to Gulf oil spill

3rd June 2010, Comments 0 comments

Moody's Investor Service on Thursday lowered BP's ratings from Aa1 to Aa2, citing the impact of the Gulf of Mexicio oil spill, and after an earlier Fitch ratings downgrade to the British energy firm.

"Moody's Investors Service has today downgraded the senior unsecured ratings of BP plc and its guaranteed subsidiaries by one notch to Aa2 from Aa1," the group said in a statement.

"At the same time, Moody's has also placed the above-mentioned long-term debt ratings on review for further possible downgrade."

The agency added that the long-term issuer ratings of BP Corporation North America Inc. and BP Finance plc have also been cut to Aa3 from Aa2.

"Today's downgrade of BP's long-term debt ratings reflects Moody's expectation that the protracted oil spill in the Gulf of Mexico, caused by the explosion on the Transocean Deepwater Horizon drilling rig, will result in significant containment and clean-up costs as well as litigation costs.

"Moody's expects these costs to weigh significantly on BP's free cash flow generating capacity and to constrain its ability to focus on other key areas of the company's business in the near to intermediate term," it added.

Earlier on Thursday, ratings agency Fitch had cut BP's long-term issuer default rating and senior unsecured rating from AA+ to AA and placed them on negative watch, citing risks from the huge Gulf of Mexico oil spill.

BP has so far failed in all its attempts to fix the leak, triggering mounting anger in Washington as oil washes up on Gulf shores.

© 2010 AFP

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