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Reasonably high chance BP files for bahkruptcy

The specter of Chapter 11 bankruptcy terrifies Gulf residents because it could allow BP to delay, or even avoid, paying billions of dollars to businesses and individuals affected by the Gulf spill. The chapter is specifically for companies in temporary financial trouble who can reemerge as viable if they receive new funding, cancel burdensome contracts and delay, restructure, or wall off repayment obligations.

I spoke with Kaufman about the possibility of a BP bankruptcy on Monday. Here is an edited transcript of our conversation yesterday, which includes further clarifications from an email follow-up with Kaufman this morning:

Q. Let’s say you’re advising BP. What would you tell them to do?

A. I’d advise them to explore the option of bankruptcy. I only know BP from public information. BP has a lot of cash and the ability to generate huge amounts of cash. But remember, just because BP can pay claims doesn’t mean they should, or that they will, given that their primary obligation is to their shareholders.

Bankruptcy laws are designed to help companies rehabilitate themselves. What I’m suggesting here is that BP is or ought to be analyzing the possibility of insolvency proceedings, and the pros and cons of doing so. Now understand, this would be an absolute horror for the U.S. government. If BP succeeds in putting a wall around its Gulf liabilities, payment on those claims fall to the U.S. government or they’re not paid.

Q. What would a BP bankruptcy look like?

A. It could work a lot of different ways. They could cut loose BP America and it could be BP America that files for bankruptcy. My presumption is that it’s BP America that’s responsible for the spill. They can wall off the non-BP America assets from the Gulf — which is about 50 percent of the company’s net value –and try to reorganize BP America. That’s likely to take a very long time, and BP would not make good on its promise for the 20 billion [in the escrow fund].

Or they could file all of BP, and do so in London. Wonder how well-received our government and legitimate Gulf claimants would fare in a British insolvency court?

Q. Now let’s say you’re advising the U.S. government on dealing with BP. What actions do you take now to keep BP from filing for bankruptcy to limit its exposure to liabilities?

A. I would start with the same analysis BP is undertaking. Perform the same analyses BP is performing about various bankruptcy strategies and figuring out how its assets and liabilities match up structurally, and how to shift assets from one entity to another. Develop judgments about potential outcomes from those bankruptcy strategies. Develop views on total costs that BP might face. We need to be able to anticipate where and how BP is going and then plan courses of action designed both to blunt and address BP’s potential strategies.

In short, I would want to have a very good understanding of what BP could do. My thinking now is that BP America could file here or they could file the whole thing in London. Why should they continue to get berated by this country, pay $20 billion [via the escrow fund] and still face an unlimited liability for not only civil, but also for criminal charges, if there’s a better way for the company?

It would be a mistake, in my judgment, to view BP as a political piñata that can be beat around the head repeatedly without consequences. It’s not reasonable to expect BP to pay unlimited liabilities and face criminal charges, and the United States needs to understand the size of the gun BP can pull.

Q. I see the case for exploring the bankruptcy option. But what are some reasons they shouldn’t file for Chapter 11?

A. If BP makes the calculated decision that the amount of damages they’ll have to pay doesn’t warrant the money, time, risk, hassle of going through solvency proceedings, they won’t do it.

In short: if both sides fully understand the alternatives and options available to everyone around the table, that should lead to a global resolution and settlement. Otherwise, it will be rampant litigation and BP could pull some very unpleasant surprises. I should not want to see the United States surprised and unprepared.

Unions to help Gillards ‘ defeat Abbott’

‘Unions will continue working with Julia Gillard and the Labor government to secure the economic recovery and ensure it delivers strong growth in jobs and benefits to all Australians.’

Mr Lawrence said the ACTU supported Labor’s economic, tax and social reform agenda, including its proposed tax on mining super profits.

He paid tribute to Mr Rudd’s legacy, including his leadership through the global financial crisis and his apology to the stolen generations, saying he had much to be proud of.

Australian Workers Union national secretary Paul Howes said Ms Gillard would move quickly to ‘re-establish Labor’s credentials’ among working people.

AWU secretary Bill Ludwig was instrumental in forcing out Mr Rudd, who he called ‘toxic’, saying Ms Gillard was the only option if Labor was to win the election.

‘Julia has played a central role in ridding Australia of the hated Work Choice laws,’ Mr Howes told a rally n Melbourne.

‘To keep our fair work laws for all Australians we need to get behind Julia Gillard – we cannot afford to see Tony Abbott in The Lodge.’

Mr Howes thanked Mr Rudd for ending the labour movement’s ‘years in the political wilderness’.

‘We will always be indebted to him for that important win,’ he said.

‘Kevin has done an important job, a good job but the voters have stopped listening to our message – it is important that we don’t get sidetracked by issues involving personalities.’

The Transport Workers Union said Mr Rudd’s ‘so-called colleagues and friends’ had ratted on him.

‘But that’s politics,’ Queensland branch secretary Hughie Williams said.

He said Ms Gillard would have some ‘dry gullies to cross’ but added: ‘She’s quite a clever person and I think with a little bit of help she’ll probably make a very good prime minister.’

The Australian Nursing Federation said Ms Gillard’s priorities must be health reform and industrial relations.

The powerful right-wing lobby group Australian Christian Lobby (ACL) said she must confirm Labor’s concern for the poor and the disadvantaged, and the social values that Mr Rudd held firm.

Academic Lauren Rosewarne, from the University of Melbourne, said Ms Gillard’s elevation was a fantastic day for women.

‘It would be wonderful if we didn’t need to draw attention to the fact that Julia Gillard is a woman,’ said Dr Rosewarne, who is an expert in feminist politics.

‘But she is, and it would be amiss not to pause and acknowledge this remarkable development.

‘The fact that we have to talk about her being the first female PM reminds us how far we have left to come.’

Green groups have called on Ms Gillard to put an emissions trading scheme back on Labor’s immediate political agenda.

‘We believe the Labor party’s backflip on the emissions trading scheme and its associated decline in the polls is a key reason we now have a new leader,’ WWF Australia’s chief executive Greg Bourne said.

‘No combination of energy efficiency, clean energy, soil carbon or any other policy will be enough without an ETS.’

Greenpeace said Ms Gillard should immediately introduce an interim carbon levy until an ETS could be implemented.

NSW Parliament swamped by 7.725 anti-coal petitioners

NSW Parliament swamped by 7,725 anti coal-power petitioners

Media release: 24 June 2010

Petitions signed by 7,725 citizens of NSW calling for the Keneally government to abandon its plans for new coal-fired power stations were tabled in parliament today, according to Greens NSW MP John Kaye.

Dr Kaye said: “Treasurer Eric Roozendaal’s plan for two new fossil fuel baseload power stations is rapidly becoming an embarrassment to the Keneally government.

“Community opposition is growing as people realise that the new power stations will increase the state’s greenhouse gas emissions by up to 17 percent and drive up household power bills.

“Shortly after the petitions were tabled, Planning Minister Tony Kelly was unable to defend his statement that the state faced power shortages if the new baseload generators are not built.

“In his answer to a question about a court challenge to the planning approval, the Minister could not explain why he persisted with the myth that more baseload power was needed to maintain supply reliability.

“The state is being stampeded into expensive and polluting power generation projects that are not need to keep the lights on.

“It is time for the Keneally government to listen to the community and to energy experts who are telling them that energy efficiency, demand management and renewable energy are cheaper and less polluting options.

“Environment groups, the Greens and local climate action groups found a great deal of enthusiasm for the petition.

“The many volunteers across the state who have been collecting signatures should be congratulated for taking a stand against new coal-fired power stations,” Dr Kaye said.

For more information: John Kaye 0407 195 455

Truce called in mining tax battle

BHP Billiton, the world’s largest miner, moved quickly to say it would suspend its advertising on the tax, which was followed by the association of mining an exploration companies also agreeing to pull its ads.

Minerals Council of Australia chief executive Mitch Hooke said the group was also suspending ads in anticipation of being able to discuss all key issues of the tax.

A BHP spokeswoman said the miner was encouraged by the comments of Ms Gillard that her government will open the doors for negotiation with the objective of achieving consensus.

“The industry has consistently been calling for the government to take the time to properly engage on all aspects of the tax, and we welcome the opportunity to do so,” the spokeswoman said.

“In response to the new Prime Minister’s request, we have immediately asked our agencies to suspend all advertising as a sign of good faith.”

Earlier today, in her first speech as prime minister, Ms Gillard said she would “throw open the government door” to the mining sector and in turn, asked the industry to open its mind.

“To reach a consensus we need to do more than consultation, we need to negotiate and end this uncertainty, which is not good for the nation,” she said.

Mining stocks had already jumped early today on the anticipation Ms Gillard would have a softer approach on the tax. Fortescue Metals, Rio Tinto and BHP Billiton were all higher.

Ms Gillard became Prime Minister today after Kevin Rudd stepped aside as leader, following a dramatic slump in opinion polls.

Mine Life analyst Gavin Wendt said the initial reaction of mining stocks was not surprising as all the language from Mr Rudd was that he was anti-mining and was not going to back down from the proposed resources tax.

The value of Australia’s biggest resources companies had crashed $16 billion in the two days following the announcement of the tax on May 2, leading to a robust industry-wide campaign slamming the tax and criticising the government for lack of consultation over the significant changes.

Fortescue chief executive Andrew Forrest said Ms Gillard’s appointment was a reflection of the concern the Australian community had with the tax

“In its existing form, the insidious consequences of the RSPT proposal had the potential to seriously deter the continued growth of the Australian mining industry,” he said.

Mr Forrest said his Pilbara iron ore company would contribute to constructive and open negotiations with the government to achieve a sound outcome that will not penalise the industry.

Atlas Iron managing director David Flanagan, who organised a recent rally in Perth against the tax, said while the industry was willing to negotiate with the new Prime Minister it would maintain its firm opposition to the controversial proposal.

“Julia was part of the team that came up with the idea to ambush the mining companies,” he said.

Mr Flanagan said the tax proposal needed to be dropped and started again, adding the sector would negotiate with the government on that basis.

“Every day this goes on, it is doing no one any good. Our international reputation and ability to borrow money is being damaged.”

Mike Young, managing director of emerging Pilbara miner BC Iron, said earlier today that Ms Gillard needed to distance herself from Mr Rudd’s strategy and start consulting with the sector.

“The industry has always said we are happy to consult on the tax but the lack of consultation really got the sector offside,” he said.

“No one is saying she wasn’t in the gang of four that decided on the tax but the ultimate decision wasn’t hers.”

Julia Gillard Takes Power

A leader that had campaigned so well in 2007, that had led Labor to victory after the wilderness years of John Howard’s government has not even survived his first term — knifed by the party apparatchiks who control the factions in the Australian Labor Party’s byzantine internal politics.

At the end, his only friends were members of the Left faction he didn’t even support. It was left to John Faulkner to walk him from the party room through the media pack, as The Australian’s Samantha Maiden trailed alongside with a tape recorder. He kept his composure, but only just.

“I was elected the leader by the people of Australia as the Prime Minister of Australia” he declared in his defiant press conference last night, but of course the Prime Minister holds that role only with the support of Parliament. In the party-political system of this nation, that means the support of the parliamentary members of your party. John Howard always enjoyed that support. Kevin Rudd enjoys it no longer.

The men who have removed the man who was only 18 months ago Australia’s most popular Prime Minister ever have re-asserted their control over the party. They are not exactly faceless — they have been variously reported as Mark Arbib, Karl Bitar and David Feeney — and nor is this a purely factional coup. In the end, Rudd proved so unpopular among his colleagues that he didn’t even stand against Julia Gillard, realising that he had no chance of success.

While Kevin Rudd was at one time very popular in his party, in truth his support base was always narrow. Rudd comes from Queensland, rather than the traditional power-bases of ALP politics in New South Wales and Victoria. And although he was aligned with the various right factions, including the New South Wales Right, who supported him as the man they considered best able to win the 2007 election, he was never truly one of them in the way that Paul Keating was.

Rudd’s famously dysfunctional management style has also played a part in his downfall. Unlike John Howard, the outgoing Prime Minister has not made a habit of cultivating back-benchers and office bearers in the party. He has been disorganised, rude and at times peremptory — not a recipe for personal support.

Once the move to replace Rudd began to gather steam last night, it quickly became unstoppable. Even those who wanted to stand on the sidelines were forced to declare their support. In doing so, federal Labor has turned to the only obvious candidate — the woman they believe can stem the deterioration in Labor’s electoral support and lead the government to re-election.

Julia Gillard is our new Prime Minister: the first woman to hold the highest office in the land. A nation founded by predominantly male settlers finally has a woman leading it. But can she lead Labor to re-election?

That depends whether you think the Government’s problems are merely about leadership and communication, or whether there are more substantial issues.

It is an issue of policy — the backflip on the emissions trading scheme — that has proved to be a significant factor in Labor’s slide in the opinion polls.

It is an issue of policy — refugee and border protection policy — that has marginal seat members in the outer suburbs spooked.

It is an issue of policy — the Resource Super Profits Tax — that has dominated media coverage of politics for the past six weeks, further damaging Labor in the polls.
Ironically, last night’s coup came after a reasonably good week for the Government. The passing of the Paid Parental Leave scheme and the broadband network deal with Telstra gives Labor some important legislative wins and some good news announcements to sell in the media.

But Rudd’s time had run out.
When it came to speak to the media this morning, he let slip the logical mask. Rudd’s concession speech was his best in many months, indeed, one of his best in office. Flanked by his children and wife Therese, Rudd ticked off a long list of his Government’s achievements, before losing his composure when talking about his achievements in health policy, in rural cancer care and in establishing a national organ donation register.

“People out there are three times more likely to die in the first years of their diagnosis through the lack of services … we’ve done something to change that … and it’s big,” the Prime Minister blubbered. It was a compelling moment of political drama.

We saw Kevin Rudd refer specifically to his moral and spiritual beliefs, to his love for his wife and his family, and for the pride he feels in the achievements as Prime Minister. When he referred to the momentous event of the apology to the Stolen Generations, we saw, once again, the sensitive and affectionate man so many Australians had warmed to.

It was a little bit of Kevin07 at the last, but it was far too late.

“And now, we’ve got to zip,” he finished, and disappeared behind the curtains of the doors to the Prime Minister’s courtyard.
And then, in the brutal way of politics, focus turned to the new leader.

In contrast to her departing predecessor’s, Julia Gillard’s press conference was measured, competent and controlled. “I asked my colleagues to make a leadership change because I believed that a good government was losing its way,” she declared.

The new Prime Minister laid out her background, values and governing philosophy. She spoke about growing up in “the great state of South Australia” and the importance of hard work she had learnt from her parents. She took responsibility for her role in the current government, and promised a more consultative and open government under her watch. She signalled her belief in climate change, she paid tribute to the troops serving in Afghanistan, and she spoke at length about “a nation where hard work is rewarded and where the dignity of work is respected.”

The policy consequences of the new leadership team will be intriguing to watch, in both the short and long term. Gillard immediately flagged that she will drop the Government’s taxpayer-funded pro-RSPT ads and “throw open the doors” to the mining industry. In return, she asked the mining industry to scrap their attack ads — an interesting tactic, and a tacit admission of the pain the mining tax controversy was inflicting.

Gillard also pledged to campaign to win a national consensus on the need for a carbon price and increased taxes on mining, but she pointedly stated that, on refugee and asylum seeker policy, “I am full of understanding of the perspective of the Australian people that they want strong borders, and I will provide them.”

And so Julia Gillard and Wayne Swan departed for an appointment with the Governor-General — marking another dramatic point in what has been an extraordinary 24 hours in politics.

Author: admin

Reasonably high chance BP files for bahkruptcy

Unions to help Gillards ‘ defeat Abbott’

NSW Parliament swamped by 7.725 anti-coal petitioners

Truce called in mining tax battle

Julia Gillard Takes Power

Rudd does the right thing by Labor

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