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Capital Markets

Deals of the year 2010: BP $3.5 billion senior unsecured dual tranche

After 2009’s blockbuster year for corporate issuance, 2010 was relatively subdued. The common reason for this put out by debt capital markets participants was that although issuance conditions were generally conducive for investment-grade companies, they simply didn’t need the funds. They were in fact hoarding cash. US companies have been doing so at the fastest rate for more than 50 years and European and Japanese companies have been following suit.

BP
Size: $3.5 billion senior unsecured dual tranche
Date: October 1
Leads: BNP Paribas, Citi, RBS, Barclays, Mizuho
Coupon: 3.125% and 4.5%

The standout investment-grade transaction this year involved a company that had the odds stacked against it. For BP, 2010 won’t go down as one of the best years in its history. In April, the Deepwater Horizon incident in the Gulf of Mexico created the largest marine oil spill in the history of the petroleum industry, spewing out an estimated 4.9 million barrels before the well leak was officially declared sealed on September 19. Under siege by the US government to cover the full cost of the clean-up, BP suspended dividend payments and began selling assets to fund the operation. Meantime, credit default swaps spiked, with one-year CDS trading at 1,100 basis points and the five-year at 690bp, from 45bp in March. From BP once being considered one of the most secure corporate credits on the planet, the markets were now attaching an unofficial junk status to its credit profile.

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