British Petroleuma multinational oil and gas company headquartered in London, announced that it had raised $12 billion in debt with equity-like characteristics, according to an FT report, trying to take advantage of boiling credit markets to inject new capital and consolidate its balance sheet .
The world’s sixth-largest oil and gas company raised $5bn, £1.25bn and €4.75bn, locking in its annual interest as low as 3.25% on some of its new notes in euros.
This is the biggest sale ever of this type of hybrid securities, which relieves the balance sheet of the company because the amount of the principal raised on the debt is never repaid.
The capital injection comes just a day after oil giant British Petroleum, now known as BP, announced it would write down the value of its oil and gas assets by $17.5 billion amid the pandemic of coronavirus has virtually paralyzed the global economy, affecting daily business and demand.
The COVID-19 crisis also massively affected energy demand, leading to record crude oil prices in April, prompting the oil company to shift away from fossil fuels.
Citigroup’s head of debt capital markets, Colm Rainey, said in an interview with the FT, “BP hasn’t issued hybrids in any market and now they’re hitting all markets at once. A hybrid of decent size and price can help the balance sheet in the eye of the storm. »
Julian Marks of Neuberger Berman, who manages a fund dedicated to investing in hybrid bonds, said in an interview with the FT: “Obviously, given the difficulties in the sector in recent [and] the drop in the price of oil linked to COVID-19, it is a very good way to improve their credit profile.
Stock market outlook:
Goldman Sachs Group set a price target of 550 GBP ($7.00) in a research note published on Tuesday. BNP Paribas lowered its price target to GBX 430 ($5.47) from GBX 600 ($7.64). Deutsche Bank pegged it at 300 GBX ($3.82).
Further away, JP Morgan Chase and Company set its target price at GBX 425 ($5.41) and reaffirmed a Buy rating. Credit Suisse Group set it at 350 GBX ($4.45) and note the title as “Neutral”. DZ Bank AG lowered its price target to GBX 280 ($3.56) from GBX 300 ($3.82).
This article was originally published on FX Empire