Daily News: February 12, 2016

Drawdowns Raise Concerns About Banks’ Energy Exposure


According to the Wall Street Journal, struggling oil and gas companies are maxing out revolving credit lines typically used to cover short-term funding gaps, raising fresh concerns about banks’ exposure to the decline in energy prices. Midstates Petroleum, Linn Energy and SandRidge Energy recently drew down the full balance of their revolving credit lines.

Drawing down fully on a revolving loan can signal a company is building up its cash reserves ahead of a bankruptcy filing or that it is worried lenders may at some point cut off access to credit. The shift represents another piece of bad news for bank stocks, which have been hammered lately on a number of worries, including the level of loan portfolio exposure to the energy sector.