Oil giant BP Plc is considering a corporate debt offering of $5 billion to $10 billion as early as next week, CNBC reported on Thursday.BP is discussing the offering with five banks, including Goldman Sachs and Morgan Stanley, CNBC reported. A spokesman for Goldman Sachs declined comment. Morgan Stanley and BP did not have any immediate comment."Demand for any bonds would depend on the specifics of a deal, including whether the debt is backed by BP's assets," said Vivek Pal, senior analyst at Knight Libertas, a broker-dealer in Greenwich, Connecticut. "Investors would demand a large level of protection; no one wants to step in front of an open-ended liability claim."A better way of raising funds would be to sell assets, he said.Scientists on Tuesday raised their high-end estimate of the amount of oil flowing from BP's ruptured Gulf of Mexico well to 35,000 to 60,000 barrels per day. They had first estimated the leak at 12,000 to 19,000 barrels per day."I would imagine BP is going to have to pay up in order to raise any money," said Jim Barnes, fixed-income manager at national Penn Investors Trust in Reading, Pennsylvania. Investors who are comfortable with BP's situation and its ability to remain a going concern may have interest at a price, he said.Sales of $5 billion or more have been rare in the corporate bond market this year where issuance has slowed to a trickle as a debt crisis in Europe soured investors' appetite for risk.A bond offering would be mixed news for investors, said Adam Cohen, founder of research firm Covenant Review in New York."For shareholders, it means BP is going to be paying more in interest each year and shareholders are going to be even further back in the pecking order for their share of BP's cash flow," he said. "On the other hand, a successful bond deal will signal confidence in BP and mean that even more investors - new bondholders - are committed to seeing BP survive - it makes bankruptcy more politically unpalatable."BP's bonds rallied on Wednesday and Thursday after the company said it was suspending its dividend for three quarters to help finance a planned $20 billion fund to pay for the costs of the oil spill. BP also said it would reduce its investment program and sell $10 billion of assets.Asked on a conference call on Wednesday if BP planned any external financing for its oil spill costs, Chief Financial Officer Byron Grote said the company does external financing "when it's appropriate ... But there's nothing tied with that explicitly in any form."Yield spreads on BP Capital Market's 5.25 percent notes due in 2013 narrowed by 28 basis points on Thursday to 605 basis points over Treasuries, according to MarketAxess data.PIMCO, the world's largest bond fund, recently bought $100 million of short-dated BP paper, Bill Gross, its co-chief investment officer, said on Wednesday.(For more news on Reuters India, click http://in.reuters.com)News posted by www.newsinfoline.com
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