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Thursday, March 28, 2024

BP Agrees To Place $20 Billion In Escrow

Courtesy of Tyler Durden

WASHINGTON — BP tentatively agreed on Wednesday to create a $20 billion fund to pay claims for the worst oil spill in American history. The fund will be independently run by Kenneth Feinberg, the mediator who oversaw the 9/11 victims compensation fund, according to two people familiar with the deliberations.

The agreement was not final and was still being negotiated when President Obama and his top advisers met Wednesday morning with BP’s top executives and lawyers. Its preliminary terms would give BP several years to deposit the full amount into the fund so it could better manage cash flow, maintain its financial viability and not scare off investors.

The talks have been complicated by the fact that BP’s ultimate liabilities for the cleanup and lost business are unknowable since the two-month-old leak of its well in the Gulf of Mexico could well be spewing some oil for months more. To date, BP has spent more than $1 billion on containment, cleanup and claims from the Coast Guard, fishermen, oil workers and other businesses from Louisiana to Florida.

The negotiations since late last week have been closely held given the market sensitivity for BP, whose stock has lost about half its value. BP’s next dividend for shareholders is another issue on the table. Some members of Congress have called for blocking any dividend payments, though the legality of such action is in dispute, or for putting the dividend in another escrow account pending payment of claims to victims. Either option would be problematic for many institutional investors and pension funds with stock in BP.

Read more here.

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