International ratings agency Fitch said on June 15 that it had slashed BP's credit rating by six notches from "AA" to "BBB", citing the impact of the Gulf of Mexico oil spill disaster.
"Fitch Ratings has downgraded BP plc's long-term issuer default rating and senior unsecured rating to 'BBB' from 'AA'," it said. The 'BBB' rating is just two notches above junk status.
Fitch blamed higher estimates for the size of the oil spill and U.S. calls for the group to place funds in an escrow account to fund any potential liability claims.
"The principal changes in circumstances ... include the indication late last week from U.S. government scientists of a significantly higher spill rate than previously announced by all parties, which Fitch expects will materially increase BP's exposure to Justice Department fines," it said.
It also added that there was a "significant step-up in action from the U.S. government surrounding calls for pre-emptive escrowing of damage claims."
"Both of these events have a direct bearing on BP's fundamental financial flexibility."
As a result, BP was facing higher near-term costs than the agency had previously expected.
Despite the downgrade, BP saw its share price climb 0.59% to 357.55 pence in early afternoon London trade on the FTSE 100 index, which was 0.44% higher at 5,225.13 points.
The oil spill has already cost BP some $1.6 billion since the Deepwater Horizon rig it leased sank on April 22, and it may have to pay out several more billions.
Copyright Agence France-Presse, 2010