The cost of insuring debt issued by BP PLC (BP.LN) hit a record high Tuesday, shooting up 75% on the news that the oil company has failed in its efforts to plug a leaking oil well in the Gulf of Mexico.

Around 1300 GMT, BP's five-year credit default swap spread was quoted 76 basis points wider on the day at 173.5/182.5 basis points, according to data provider Markit, meaning it now costs an average of $178,000 a year to insure $10 million of debt issued by BP.

CDS are tradable, over-the-counter derivatives that function like a default insurance contract for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller.

BP attempted a so-called "top kill" maneuver, which involved pouring thousands of barrels of mud to plug what has now been recognized as the worst oil spill in U.S. waters.

Following the failure of the maneuver, the company said it is now working on deploying a so-called lower marine riser package containment system, but as with other attempts by BP, the system has never been attempted at 5,000 feet under water.

The one solution that seems likely to work--drilling relief wells--won't be completed until August.

The company's shares were also down 15% on the news at 422 pence.

Διαβάστε ακόμα