"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," he said. "Given the plunge [image-nocss] in BP's share pricethe company has lost more than a third of its value since Deepwater Horizon blewsome bankers and analysts say BP is starting to look like takeover bait," according to Sorkin. "The question is, who would buy BP, given its enormous potential liabilities?"
CSP Daily News readers are wondering, too. A recent poll asked, "As a result of the oil spill in the Gulf of Mexico, do you believe BP is vulnerable as a company?" Of the nearly 230 responses, more than 70% said yes, while almost 30% said no.
Meanwhile, a subsequent poll asked, "Should Tony Hayward resign as CEO of BP?" Of the more than 180 votes, about 39% said no; about 23% said yes, immediately; nearly 20% said it depends on how efforts to stop and clean up the oil leak progress in coming weeks; and more than 17% said not until the oil leak is resolved.
"Shell and ExxonMobil are both said to be licking their chops," continued Sorkin. "And already, flinty legal minds are dreaming up scenarios in which BP would file a prepackaged bankruptcy and separate the costs of the cleanupand potentially billions of dollars in legal claimsinto a separate corporate entity.
"Tony Hayward, BP's chief executive, has insisted that his giant will weather this storm.... But that hasn't stopped the deal crowd from blueskying potential outcomes."
Sorkin said he thinks that the greatest to BP is a jury verdict against it. "Such a verdict might push the cost of the spill into the hundreds of billions. If that happened, even BP might buckle," he said.
"This outcome might seem far-fetched right now. But on Wall Street bankers have already coined a term for it: 'the Texaco scenario.' 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 [after] Pennzoil successfully sued Texaco for 'jumping' its planned merger with Getty Oil....
"Imagine the BP case playing out in a Louisiana courtroom, against the backdrop of an oil-choked local economy, high unemployment and an angry public. How high can you count?....
"Given that Shell and Exxon have billions in cash on hand and market values that easily exceed BPExxon is twice the sizebankers say now is the time to make a deal, as long as an acquirer can find a way to separate the legal exposure. That, of course, is a big 'if.'
"There are many peoplebesides BPwho think even discussing the possibility of a bankruptcy or takeover is silly. But looking out a few years, that may be BP's best, last hope."
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