BP Initiates New Information to Combat Drumbeat to Kill It

SAN FRANCISCO (MarketWatch) -- BP PLC has several options to explore in dealing with the worst environment disaster in U.S. history, but the oil giant may file for bankruptcy if it faces a never-ending flow of claims, lawyers and bankers said Tuesday.

"BP has many options besides bankruptcy and is a long way from exhausting those," said Loretta Cross, a national managing partner at Grant Thornton's corporate-advisory and restructuring-services group, during a conference call organized by the American Bankruptcy Institute.

The Deepwater Horizon platform exploded on April 20, killing 11 people. It sank two days later, triggering a massive oil leak that's still spewing oil and gas. BP shares have plummeted on concern that the company could be overwhelmed by tens of billions of dollars in claims and other liabilities. Read about the stock drop.Cross, who specializes in energy-company reorganizations, estimated Tuesday that BP (BP 27.84, +0.17, +0.61%) needs roughly $30 billion in cash outside of what the company can generate from its balance sheet.

"Finding that $30 billion among their assets is a better solution than filing for bankruptcy and the ramifications it would have for BP's business partners as well as its reputation," she remarked during the conference call.

BP could sell up to $30 billion in debt and still be at the industry average for debt to earnings, before interest, taxes, depreciation and amortization, according to Cross.

The company also has tangible assets with a total value of about $232 billion, giving it "an enormous war chest" to tap if necessary.

What's more, BP could reduce capital expenditures, which totaled about $52 billion over the past two years. However, this would be the least attractive option because it would dent the company's future income, she said.

BP also spent roughly $10 billion a year over the past two years on dividends and those will likely be "curtailed or reduced," Cross added.

The company can also look to "other responsible parties," such as Anadarko Petroleum Corp. (APC 36.40, -0.27, -0.74%) , Mitsui, Transocean Ltd. (RIG 47.08, +0.26, +0.56%) and Halliburton Co. (HAL 24.48, -1.51, -5.81%) , she indicated.

A longer-term solution may be a takeover of BP, Cross said. Read about renewed takeover talk.

'Delay, delay, delay'

But even if BP has such financial flexibility, the company may be considering filing for bankruptcy, according to Peter Kaufman, head of Gordian Group's restructuring and distressed M&A practice."Just because BP can afford to pay all claims, that doesn't mean it will or should," Kaufman said during the conference call organized by the American Bankruptcy Institute. "As investment-banking adviser to BP, I would be working on a plan to help them minimize how much they pay.

"My advice to the board would be to delay, delay, delay," he added.