British Petroleum, Standard Oil Placed on Creditwatch
NEW YORK (SWN) - The debt ratings of British Petroleum (BP) PLC's and Standard Oil Co. are placed on S&P CreditWatch with negative implications following BP's $7.4 billion tender offer for the 45 percent of Standard Oil it doesn't already own, S&P said Thursday.
At year-end 1986, about (U.K.) 5.1 billion pounds of BP debt was outstanding on a consolidated basis (including Standard Oil debt), and Standard Oil has about $3.7 billion of debt.
BP indicated it would finance the acquisition with up to $5.0 billion in incremental debt. The acquisition would provide BP with full control over Vtandard's 3.6 billion barrels of oil equivalent and downstream operations, and potential access to its cash flow.
However, this could increase BP's total debt to over 50 percent of capitalization from 39 percent at year-end 1986, reducing the company's financial flexibility.
Standard's credit profile could be impaired if its excess cash is utilized to service acquisition-related debt. Moreover, integration of Standard into the BP group as a wholly-owned entity may result in an equalization of the respective debt ratings. …