The Gulf of Texaco?

June 14, 2010

How much will the Gulf disaster cost BP?  Its quarterly dividendOne billion dollarsSix billionFourteen billion

How about everything?

Andrew Ross Sorkin writes that lawyers and investment advisors are already contemplating a potential bankruptcy for BP.  According to Sorkin, some on Wall Street are already strategizing ways to use a “pre-packaged bankruptcy” to push BP’s clean-up costs and spill-related liabilities into a separate entity.  The remaining “cleaned-up” assets would be sold to an industry-rival.

Sorkin calls this the “Texaco Scenario”.

In 1987, Texaco, saddled with a $1 billion judgment, filed Chapter 11 to escape paying this debt.  What remained was later bought by rival Penzoil.

Running a search of ti(texaco) & bankrupt!  in TP-ALL will bring you to 21 articles.  Some of the titles include, “Texaco !! – Rethinking Environmental Claims in Bankruptcy”, “Bankruptcy Filing Nixes Shipyard Worker’s Cancer Claim” and  Treatment and Discharge of Environmental Obligations – Chapter 11 Reorganization”.

 As BP’s bills mount, so too will additional calls for more dividend suspension, additional fines and heavier penalties.  Sorkin may be spot-on in predicting what could become a phenomenally large and complex corporate bankruptcy.