U.S. bankers and fossil executives say “substandard or worse” industry debt and loans at risk of default are about to exceed reliably serviced loans to the sector.
“Fearing that liability,” E&E News [subscription required] writes, “banks are either trying to sell off the bad loans, declining to renew them, or making them more difficult to get cash from.”
The trend makes cash harder to raise even for solvent companies, E&E reports. One company was able to raise funds only by accepting a steep 12.5% interest rate, reducing its credit line by US$350 million to $100 million, and agreeing to use any cash it has on hand above $30 million to pay the line down.
“As it gets harder to get or access loans,” E&E anticipates, “more oil and gas businesses will likely succumb to bankruptcy, following the 51 North America companies that have filed since the start of 2015.”