BP Corporation’s Sources of Finance: A Critical Analysis

This article critically analyzes and evaluates BP Corporation’s sources of finance, including debt funding options, domestic and external financing choices, and financial aspects that lending institutions consider while granting a loan application.

International Financial
Management

Contents
Critically analyses and evaluates BP Corporation’s sources of finance....................................................3
REFERENCES................................................................................................................................................6

Critically analyses and evaluates BP Corporation’s sources of finance
BP is a well-known corporation in the combined petroleum industry, providing products
such as fuel, lubrication, electricity, and chemical products. The corporation engages with all
associated fields to retain its renowned reputation, covering oil and gas drilling, manufacturing,
processing, advertising, and transportation, as well as power and petroleum products
development and marketing. Offshore, middle, and upstream are the 3 primary sectors in which
the company works. BP is engaged in the extraction, site preparation, and research of oil and
natural gas in the upstream operations (Eichengreen and Shah, 2020).
As it faces a catastrophic oil disaster, BP Plc is considering a variety of debt funding
options, including credit facilities and a bond fund issue of up to $10 billion. Normal & Poor's
officially downgraded BP BP.LBP.N, making any attempts to increase finance more difficult. BP
is evaluating all possibilities, including a bank credit facility, as per a participant. A bond sale
might change as soon as next week, as per the individual. As per experts, Blackstone Group,
Goldman Sachs, Morgan Stanley, Credit Suisse, and UBS are some of the businesses helping the
company. Each organization has declined to make a statement about the problem.
Bigger companies can obtain payments by utilizing a variety of sources of funding, which
are separated into two groups: domestically funded and internationally funded. Cash reserves,
disposals, and lesser inventories, longer repayment arrangements for providers and rapid debt
collection for debtors are all domestic sources of financing. External funding choices, on either
hand, are separated into three types: long-term, moderate-term and quick funding. Long-term
financing options comprise shares, marketable securities, lines of credit and scholarships, while
current and long financing options include leasing, leasing and bank loans, these included bank
loans, borrowers, and financial loans/overdrafts.
This indicates that the market provides a number of financing options via which enterprises
may swiftly get money, but banking firms must consider particular financial aspects while
granting a loan application. Several of the aspects that should be considered are as follows:
Debt situation: The mortgage lender should examine the company's debt problem to see if
current debt exceeds the stipulated amount. This financial component assists lending institutions

in assessing the firm's valuation, which is used to approve loan documents. A firm's
creditworthiness long-term debts and receive more borrowing can be established by examining at
its debt condition. This information could be used to evaluate the debt-to-equity ratio in the
financial performance, and to determine the government's ability to pay back the debt on a long-
term basis (Said and Doll, 2021).
Liquidity: A measures of a firm's creditworthiness its current debt obligations.
Throughout a liquidity evaluation, the availability of cash or marketable securities is disclosed,
which aids in determining the ability to pay back loan installments when they are due. Whenever
considering a loan application, financial institutions must consider this business system to
establish if the firm has adequate currency to pay back loans on time.
Market reputation and risk: Another monetary area that is strongly linked to economic
position is marketplace character and threat, as good market image and lesser hazards indicate a
decreased likelihood of failing to pay. Risk shows the amount of danger in the company's
worries and activities interactions, while assessed predicated is important to investigate for the
commercial bank to extend credit track's trustworthiness (Subiyanto and Ghozali, 2021).
Productive development must be analyzed by a commercial bank since it is one of the
most important accounting areas that indicate the company's income ability and expertise. In the
short term, reviewing income revenues and the amount to be borrowed may be a straightforward
way for borrowed businesses to establish viability. In the subject of business to new heights, the
potential to collect enormous profits by efficiently utilizing resources is crucial. Based on the
important banking systems, the lending firm will analyses the borrower's creditworthiness the
loan balance interest payments inside the set time period. Profit, long-term sustainability,
borrowing situation, past excellent credit, risk and predicted development are all factors
considered when choosing to choose whether or not accept a loan application (Chitenderu and
Ncwadi, 2020).
According to a source, BP is considering all options, including a bank loan facility. A
bond sale might happen as soon as this week, according to the source. According to insiders, the
Blackstone Company, Goldman Sachs, Morgan Stanley, Credit Suisse, and UBS are advising the
company. All of the banks refused to elaborate.

Bond offering
On Thursday, some bankers and debt experts expressed doubt about the possibility of a BP bond
issue. Because bonds are trading at high prices, a source from a Continental institution said it
would make sense for the firm to resort to the lending market instead of issue securities. As per
MarketAxess data, yield gaps on BP Capital Market's 5.25 % senior notes in 2013 tightened 13
basis points to 620 basis points over Treasuries on Thursday. "BP's best hope for obtaining any
leftover money is the loan market. "BP is a good investment grade name with no genuine
liabilities," according to another source. "Many major banks will want to keep BP loan assets."

REFERENCES
Books and Journal
Eichengreen, B. and Shah, N., 2020. The correlates of international financial‐center
status. Review of International Economics. 28(1). pp.62-81.
Said, K. and Doll, Y., 2021. Strategies to Improve Financial Profitability in the Banking
Industry. International Journal of Applied Management and Technology. 20(1). p.3.
Chitenderu, T. and Ncwadi, R., 2020. 9 Rethinking global financial architecture. Rethinking
Multilateralism in Foreign Aid: Beyond the Neoliberal Hegemony, p.132.
Subiyanto, B. and Ghozali, I., 2021. Empirical Study of the Relationship between Managerial
Accounting Discretion and Innate Factors with the Quality of Financial
Reporting. DEGRES. 20(1). pp.59-73.
Goldman Sachs Completes British Petroleum Privatization Under Challenging
Circumstances [Online] Available through
<https://www.goldmansachs.com/our-firm/history/moments/1987-bp-privatization.html>