Fitch downgrades BP to BBB from AA

Fitch Ratings on Tuesday downgraded BP’s Long-term Issuer Default Rating (IDR) and senior unsecured rating by six notches to BBB from AA, citing the impact of the Gulf of Mexico oil spill disaster.

The agency also downgraded the Short-term IDR to F3 from F1+ and lowered the Rating Watch on all ratings from “Evolving” from “Negative.”

Fitch said the principal changes in circumstances since the agency downgraded BP from AA+ to AA 12 days ago included “the indication late last week from U.S. government scientists of a significantly higher spill rate than previously announced by all parties, which Fitch expects will materially increase BP’s exposure to Justice Department fines payable in the near to medium-term.”

The ratings agency also cited the “significant step-up in action from the U.S. government surrounding calls for pre-emptive escrowing of damage claims (from BP).”

“Both of these events have a direct bearing on BP’s fundamental financial flexibility,” Fitch said.

BP shares held steady at 355 pence on the London market despite the move by Fitch, as the market appeared to shrug off the announcement.