Energy Firms Lining Up for Emergency Financing
Reuters reported that U.S. high-yield energy companies are scrambling to line up emergency financing ahead of what is likely to be a brutal round of cuts to their revolving loans.
Reuters said that banks are expected to start reining in the size of many E&P companies’ revolvers in the spring, when the biannual “borrowing base redetermination” of the size of their bread-and-butter asset-based revolvers gets under way.
Reuters notes that if oil stays lower for longer, bankers expect history to repeat itself and for lenders to eventually start slashing borrowing bases by an average of around 15% in the junk-rated E&P sector, as they did in 2008 and 2009 when oil dropped from US$145 to US$35.
To read Reuters article, click here.