Analysts and investment bankers are beginning to contemplate the idea that BP may go bankrupt.
This is how the math goes:
BP may ultimately pay as much $23 billion to clean up the Gulf of Mexico oil spill, according to Credit Suisse.
The company also may have to pay $14 billion in compensation to gulf fishermen and the tourism industry, the New York Times reports.
The company has about $12 billion in cash and short-term investments to help pay for the tab, but already there are calls for BP to cut its dividend to preserve cash.
BP can sell assets or search for loans, but distressed borrowers and sellers rarely fare well.
The worst threat is a jury verdict against BP, which could cost it hundreds of billions, the Times says.
And that could send BP under.
However things turn out, the future looks bleak for the company.
“Even with a prepackaged bankruptcy, BP’s brand is permanently tainted,” Robert Bryce, a senior fellow at the Manhattan Institute, told the Times.
The company is unlikely to collapse, he says.
“Instead, BP will spend the coming decades circling the drain, mired in endless litigation, its reputation irreparably damaged, and its finances weakened.”
As for the dividend, the company is caught between politicians demanding it halt the payments and investors who depend on them.
"BP is almost in a no-win situation," said Colin Morton of Rensburg Fund Management, which owns BP shares.
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