Posts tagged national association of pension funds
BP’s Hayward Faces Ratings Downgrade, Investor Wrath as Spill May Cost Job
Jun 3rd
By Brian Swint
June 3 (Bloomberg) — BP Plc Chief Executive Officer Tony
Hayward faces rising speculation that the worsening oil spill
will cost him his job as he grapples with worried investors,
rating downgrades, U.S. politicians and public anger over the
company’s inability to control the crisis.
Hayward will address London’s investors and analysts
tomorrow, spokesman Mark Salt said by phone. Moody’s Investors
Service and Fitch Ratings downgraded BP today because the costs
from the accident will hurt finances. Two U.S. senators said
yesterday it would be “unfathomable” for BP to pay a dividend.
Criticism of Hayward grew this week after BP’s failure to
stem the flow from the damaged well caused the biggest share
price drop in 18 years and raised the risk the London-based
company may become a takeover target. Yesterday, he apologized
for comments last week that he wanted his “life back.”
“The pressure is on Hayward at the moment, primarily from
politicians,” said David Paterson, head of corporate governance
at the National Association of Pension Funds in London.
“Investors clearly will want some answers in order to
understand what the long-term future for the company is.”
More than 40 billion pounds ($59 billion) has been wiped
off the value of BP since the April 20 explosion that killed 11
workers on the Deepwater Horizon rig. Credit Suisse said
yesterday the disaster may cost BP as much as $37 billion,
almost double this year’s likely profit, risking a cut in
dividends.
Dividend Cut
“There is a question mark over the chief executive
officer,” said Colin McLean, of SVM Asset Management Ltd. in
Edinburgh, which holds BP shares. “The dividend will continue
but be cut. A quarter or a third is quite possible.”
BP paid a dividend of 56 cents a share last year. If it
maintains it, the ratio of dividend to the current share price
would be 9.3 percent, more than any of the company’s 18 global
peers, according to Bloomberg data.
Irish bookmaker Paddy Power offered even odds that Hayward
will leave his post by the end of year. The New York Daily News
yesterday called him “the most hated — and clueless — man in
America” for his handling of the crisis.
“It looks increasingly likely that heads will roll, and
Tony will be in the frame,” Dougie Youngson, an analyst at
Arbuthnot Securities Ltd. in London, said in a Bloomberg
Television interview. “The longer these things go on, the
shakier things look for the company.”
Under Fire
Hayward, whose call tomorrow will be relayed on BP’s
website, has come under fire from lawmakers after BP initially
underestimated the size of the leak, starting with 1,000 barrels
a day and then raising it to 5,000 barrels a day. U.S.
Geological Survey and science adviser Marcia McNutt said May 27
the well may have been gushing 19,000 barrels a day.
BP sheared away the riser from its leaking Gulf of Mexico
well today, a precursor to the company’s attempt to lower a cap
onto the leak and divert oil to ships on the surface.
An attempt to plug the well with mud and debris failed last
weekend. That means that the flow of oil from the well probably
won’t be stopped until August, when the drilling of relief wells
is scheduled for completion.
Hayward apologized yesterday for what he called “hurtful”
comments saying that he wanted the spill to end in order to get
“his life back.” That followed comments in which he said that
the environmental impact of the spill would be “very, very
modest” and that the amount of oil and dispersant is tiny
compared to the size of the Gulf.
Improve Safety
Hayward spent much of his first three years as CEO working
to improve BP’s safety record after a series of accidents,
including the deadly March 2005 Texas City refinery explosion
that helped bring down his predecessor, John Browne.
“Safety has been a major plank of Hayward’s tenure,” the
National Association of Pension Funds’ Paterson said.
Unlike Browne, Hayward didn’t attend Oxford or Cambridge,
Britain’s most elite universities. The 53-year-old was born in
Slough, England, 25 miles west of London and studied in
Birmingham and then in Edinburgh, where he earned a PhD in
geology in 1982. He joined BP the same year to work in the North
Sea and worked in Asia, South America and the U.S. before
becoming CEO in 2007.
Hayward lowered BP’s operating costs and bolstered
production, last year overtaking the output of Exxon Mobil
Corp., the world’s biggest energy company. In March, he said the
company would raise production by as much as 2 percent a year
through 2015.
“Hayward only just got his feet under the table and is
highly regarded within the company,” said Peter Hitchens, an
analyst at Panmure Gordon in London. “I don’t think Hayward
will step down, but you can never rule these things out. BP is
starting to be seen as a walking catastrophe.”
To contact the reporter on this story:
Brian Swint in London at
bswint@bloomberg.net.
Companies Resume Bond Sales
Mar 11th
Europe’s financial troubles apparently haven’t killed the party in the capital markets: Companies in the U.S. and Europe are raising huge sums of cash by selling bonds again after a brief bout of Greece-related jitters. One thing to look out for, however, are signs that some firms are having to compete fiercely with government borrowers for investors’ cash. That could make the outlook for corporate America and Europe a little gloomier.
So far, such a “crowding out” effect isn’t that visible. Recent debt sales by Germany, Portugal and Britain, among others, have performed admirably, even as a wave of U.S. and European firms have come out of the woodworks to raise cash. The quickness with which credit markets have opened up again after closing temporarily in recent weeks is a good sign. French spirits company Pernod-Ricard, for example, is out marketing a new 1.2 billion euro junk bond Thursday.
“It’s not like there is a shortage of demand out there,” says Joanne Segars, chief executive officer of the U.K.’s National Association of Pension Funds. She says investors have a strong appetite for both U.K. government bonds and debt issued by corporates – making major funding problems unlikely. She also points to the massive sums of cash that pension funds and insurance firms are sitting on that they haven’t yet invested.
Indeed, the fact that large European companies have been able to sidestep their traditional banks and tap the capital markets for cash has helped them roll over debts and avoid defaults. That, in turn, has probably prevented what would have been a weaker economic recovery in Europe.
And yet, companies aren’t alone in their cash needs. The world’s governments will be knocking on investors’ doors for cash with record frequency this year to finance large budget shortfalls. A Wall Street Journal story earlier this month pointed out that in the next three months alone, European countries are on track to raise 287 billion euros, while European banks face about 560 billion euros in maturing debt this year.
So far, both institutional investors and small “retail” buyers remain hungry for debt they can buy and hold in their portfolios over the long haul. But the danger is that at some point markets could seriously wobble for external reasons, forcing governments and companies to compete for cash and lock in high borrowing costs they can’t sustain.
