BP oil spill: What happens if the oil giant declares bankruptcy before bills are paid?
Wake up and good morning. Anybody remember the movie Oliver Twist in which a starving Oliver, stuck in a workhouse, has the audacity to ask, "Please, sir, I want some more." Gruel, that is. That's the feeling I get the further Florida gets dragged into this cycle of asking BP for more money -- for ad campaigns, for compensation for lost jobs, for clean-ups. At the federal level, President Obama says he's trying to figure out "whose ass to kick" to make things right with the spill, but we have yet to see any foot in motion. It's still early.
Sooner or later, BP's infinite wallet will shrink. This is a very big corporation but its market value is gushing faster than the gulf spill. And Florida does not seem to have grasped the idea yet that BP and Wall Street may be in the early planning stages of preparing for corporate survival. It's called bankruptcy, and plenty of other companies have willingly placed themselves in Chapter 11 protection against creditors. In 1987, Texaco was forced to file for Chapter 11 because it could not afford to pay a jury award worth $1 billion to Pennzoil.
Bankruptcy buys companies like BP time and may absolve them of many of the financial responsibilities now confronting them from all the pesky little Olivers "asking for more."
Consider New York Times reporter's Andress Ross Sorkin's Dealbook column this week: "The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees)."
According to Sorkin, both Shell and Exxon are said to be "licking their chops" to take over BP, under the right circumstances.
Is this scenario likely? It will depend ultimately on whether BP can stop the oil leak sooner than later, and whether BP's apparent negligence gets it hauled up in front of a jury some day with punitive damages on its mind. That's when BP may really be asked for a lot more.
-- Robert Trigaux, Times Business Columnist