Reuters | BP was hit by a six-notch Fitch Ratings downgrade on
Tuesday, due to the higher near-term costs of compensating spill
victims of its blown-out oil well in the Gulf of Mexico, sending its
credit default swaps wider.

The firm’s five-year CDS spread widened to 465 basis points in reaction to the move, after widening to around 450 basis points ahead of the downgrade, approximately 75 bps wider than on Monday’s close, said Markit’s Gavan Nolan.

BP’s 4.25 percent 750 million euro bond, which matures January 2011 was 113.8 bps wider, bid at 470.2 bps and offered at 325.6 bps, according to Tradeweb.

The ratings agency lowered BP’s rating to BBB from AA and left the rating on “watch evolving”, citing the increased risk BP would have to place sums in an escrow account.

This was the first multi-notch downgrade of BP by any of the three major rating agencies and the first that left it below AA.

BP finance director Byron Grote said a fortnight ago that the company wanted to keep its AA rating.

Fitch sliced the rating from AA+ by a notch on June 3, matched with similar moves earlier this month by Moody’s and Standard and Poor’s who currently rate the company Aa2 and AA-, respectively.

BP’s levels in the CDS market are more usually associated with a company rated at BB, within the sub-investment grade category or “junk”.