Fitch slashes BP rating owing to oil spill disaster

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International ratings agency Fitch said on Tuesday it had slashed BP's credit rating by six notches from "AA" to "BBB", citing the impact of the Gulf of Mexico oil spill disaster.

"Fitch Ratings has downgraded BP plc's long-term issuer default rating and senior unsecured rating to 'BBB' from 'AA'," it said in a statement. The 'BBB' rating is just two notches above junk status.

Fitch blamed higher estimates for the size of the oil spill and US calls for the group to place funds in an escrow account to fund any potential liability claims.

"The principal changes in circumstances ... include the indication late last week from US government scientists of a significantly higher spill rate than previously announced by all parties, which Fitch expects will materially increase BP's exposure to Justice Department fines," it said.

It also added that there was a "significant step-up in action from the US government surrounding calls for pre-emptive escrowing of damage claims."

"Both of these events have a direct bearing on BP's fundamental financial flexibility."

As a result, BP was facing higher near-term costs than the agency had previously expected.

"The scale of today's rating action has been partly driven by the increased risk that the balance between long-term and near-term cost payments may now be skewed much more heavily towards the near-term than previously anticipated by Fitch," Fitch added.

Despite the downgrade, BP saw its share price climb 0.59 percent to 357.55 pence in early afternoon London trade on the FTSE 100 index, which was 0.44 percent higher at 5,225.13 points.

The oil spill has already cost BP some 1.6 billion dollars since the Deepwater Horizon rig it leased sank on April 22, and it may have to pay out several more billions.

© 2010 AFP

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