One ‘Small’ Statement Backfires on BP

Re:One ‘Small’ Statement Backfires on BP by btilly on Wednesday June 16, 2010 @10:39PM (#1437773)

That article left me with no respect for Gov. Haley Barbour. His concern is that putting money in an escrow account will hurt BP's ability to do business and make money to pay people back. But the escrow account is being filled by diverting money that otherwise would have gone to dividend payments, which is money taken out of the company and put back in the pockets of investors. Therefore this does not change by one cent how much operating capital BP will have to pursue its business.

[ Parent | on HN ]

Re:One ‘Small’ Statement Backfires on BP by hga on Thursday June 17, 2010 @07:40AM (#1438543)

Not paying dividends for 2 years is going to significantly change BP's ability to raise capital; dividend cuts or suspensions are always taken as a sign of financial stress, and that's certainly what's happening here.

And who says 20 billion is the limit? A lot of people fear it's just the start.

[ Parent | on HN ]

Re:One ‘Small’ Statement Backfires on BP by btilly on Thursday June 17, 2010 @01:07PM (#1439551)

Not paying dividends for 2 years is going to significantly change BP's ability to raise capital; dividend cuts or suspensions are always taken as a sign of financial stress, and that's certainly what's happening here.

You're shooting the messenger here. Their ability to raise capital has been hurt by their legal liabilities, not by the dividend cut. In fact the dividend cut helps their ability to raise capital, not hurts it!

What this move does is transfer money from BP's investors to inevitable creditors. This therefore costs investors money up front, and reduces the chances of eventual bankruptcy. That makes it harder for them to raise money by selling stock, and easier to raise it in the credit markets. With their current problems they are better off going to the credit markets, so this helps them.

And who says 20 billion is the limit? A lot of people fear it's just the start.

I agree that 20 billion is a lower limit of their likely liabilities. Which is why they should start saving up to pay those liabilities as soon as possible.

[ Parent | on HN ]