BP & Bankruptcy

Notwithstanding my soothing words, the Treasurer of Louisiana is "fretting" over a possible BP chapter 11 case. It seems that John Kennedy (no, not that one) believes that BP only has about $12 billion in liquid assets. As I explained in the linked article, a cash flow problem could lead BP into chapter 11, but creditors should still not worry about it -- at least not yet. So long as BP's assets are substantially larger than their debts, even taking into account cleanup costs, it's the shareholders that should worry.  Creditors will be paid in full if BP is overall solvent, but if BP is short of cash, the most likely outcome in chapter 11 is payment in BP shares -- in short, the shareholders will either be  diluted or eliminated.