British oil giant BP managed to raise £9.5bn ($12bn) in hybrid corporate bonds denominated in different currencies, in an effort to strengthen its balance sheet only days after announcing it would write down the value of its assets by up to £13.8bn.
The corporate bond issue consisted of $5bn, €4.75bn, and £1.25bn allocated in the US, Europe, and England markets respectively, according to data, as the company seeks to take advantage of a low interest rate environment.
This is the first time in history that BP raises capital by issuing hybrid bonds, fixed-income securities that can be later on converted into equity, as the management team, led by chief executive Bernard Looney (pictured), considered them as the best alternative to ease cash pressures given the volatile situation in the oil market caused by the recent Saudi-Russia price war and the coronavirus pandemic.
BP (BP) shares were largely unchanged at 315p in late trading London, while the price of WTI oil futures recovered from an early slide and they are now up 0.6% in late commodity trading activity, trading at $38.57 per barrel for delivery next month. Brent futures are also up 0.6% and are currently trading at $41.32 per barrel.
BP’s decision to raise additional capital comes after the company announced on Tuesday it would book up to a £13.8bn in extraordinary charge-offs coming from asset impairments and other non-cash write-offs, which will be reflected on its results for the second fiscal quarter of 2020.
“With the COVID-19 pandemic having continued during the second quarter of 2020, BP now sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period”, said the company in a statement.
Meanwhile, concerns about the future of oil prices continue to loom in the backdrop, as China reported a surge in virus cases in Beijing, which were traced back to a popular wholesale market in the city.
Beijing officials said the reappearance of the virus was “extremely severe” and have shut down schools and stopped flights to contain the spread.
Another eruption of the disease in China, the world’s second-largest oil consumer, puts back hopes of a sustained recovery in the price of crude.