BP Plc, facing as much as $40 billion in costs for the Gulf of Mexico oil spill, may sell bonds targeting Chinese investors to diversify its sources of funding.
BP is considering debt sales in yuan as well as yen and Australian and Canadian dollars, Gary Admans, the London-based company’s manager of debt capital markets, said at Euromoney’s Corporate Financing Forum in Paris yesterday.
BP is a “very familiar name” with Chinese investors, Steve Wang, head of fixed-income research at Bank of China Ltd.’s BOCI Securities unit, said in a phone interview from Hong Kong. “The best bet for BP is to go into mainland China and do yuan bonds there because the capacity there is much bigger.”
The British oil company is raising capital after an April explosion at the Deepwater Horizon rig killed 11 workers and triggered the worst U.S. oil spill. BP agreed to sell its 60 percent interest in Pan American Energy to Argentinean oil and gas company Bridas Corp. last month for $7.06 billion, taking asset sales this year to about $21 billion. It may sell North Sea fields and infrastructure to raise a further $1 billion, a person familiar with the matter said yesterday.
China’s interbank bond market expanded to 3.3 trillion yuan ($495 billion) in the year to Sept. 31 as the government sought to wean borrowers off bank loans, according to market regulator the National Association of Financial Market Institutional Investors, or NAFMII.
Mitsubishi UFJ Financial Group Inc.’s China unit became the first overseas company to sell local-currency notes in China when it raised 1 billion yuan from variable-rate notes on May 17.
Yuan Bond Plans
VTB Group, Russia’s second-largest lender, is planning to sell three-year bonds in yuan, a person with knowledge of the deal said today. It will be the first in the currency by a Russian issuer, according to data compiled by Bloomberg.
HSBC Holdings Plc and Standard Chartered Plc have said they plan to issue yuan-denominated bonds in Shanghai as China’s bond market develops. HSBC sold yuan-denominated bonds through its China unit in Hong Kong last year, becoming the first foreign bank to do so, according to data compiled by Bloomberg.
BP, Britain’s third biggest company by market value, may seek to raise at least $500 million in the Chinese currency, according to BOCI’s Wang. At 3.3 billion yuan, a sale of that size would be a challenge for Hong Kong’s fledgling market for so-called dim sum bonds, he said.
Galaxy Entertainment Group Ltd., the casino operator part- owned by Permira Advisers LLP, plans to sell 1 billion yuan of bonds in Hong Kong, Robert Drake, chief financial officer, said in a phone interview on Dec. 6. Caterpillar Inc., the world’s biggest maker of construction equipment, sold 1 billion yuan of 2 percent bonds in Hong Kong on Nov. 24, Bloomberg data show.
BP has issued bonds in the Japanese and Australian currencies, the most recent being a A$325 million ($319 million) offering of 6 percent five-year notes on March 3, according to the data.
The company’s shares rose to the highest since May 28 yesterday, climbing as much as 2.4 percent to 461 pence in London. The stock is still down 30 percent since the accident.
The cost of protecting the company’s debt using credit- default swaps surged more than 13-fold in the wake of the crisis and is now about twice as high as at the time of the explosion at 95.5 basis points, according to CMA.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net