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BP Bankruptcy May Not Stop Most Oil Spill Claims

Posted By admin || 25-Jun-2010

BP Bankruptcy May Not Stop Most Oil Spill ClaimsWhile BP has vehemently denies that it is considering bankruptcy, the prospect of a BP bankruptcy is on the minds of many of the analysts following the oil spill disaster.   Already BP is facing more than 200 lawsuits and the U.S. is currently estimating the cost of restoring the gulf coast at about $37 billion at least. And many analysts say that even if BP wanted to repay the claims against it in full, it probably would not be able to do so without the help of Chapter 11 bankruptcy, an assertion the U.K. based oil company denies.

"The bankruptcy option is clearly there," said John Olson, managing partner of Houston Energy Partners, a hedge fund unit of Sanders Morris Harris Group Inc. "BP's board and CEO can say they've ruled it out, but you can't rule it out, realistically." Olson doesn't hold any BP shares.

But others aren't just saying that BP can't rule out bankruptcy, some are saying that the company should be forced into bankruptcy so that the U.S. can protect the company's assets and insure that they are available to pay for the cleanup costs of the disaster.  Representative Steve Cohen, said that Obama administration should consider forcing the company into bankruptcy to preserve its assets.  And White House Adviser David Axelrod requested that BP establish an escrow account for claims related to the gulf coast disaster and fund it with $20 billion to be administered by an independent trustee. But unfortunately, if BP does go into bankruptcy, there may be an automatic public outrage since many perceive, not correctly, that corporate bankruptcy allows companies to skirt their financial responsibility. The reality is that a BP bankruptcy may actually help the company preserve it assets while better enabling the company to pay for the cleanup costs associated with the gulf coast oil disaster.

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