7Twiggy wrote: What was the "unprecedented behavior of National Bank"?

 

They basically demanded in the lending renewal agreement that large chunks of production was hedged at low safe/amounts or they were not going to renew/withdraw the lending amount, just after all the other banks poo pooed lending to the oil patch and killed several other companies... I believe Cardinal was one of the first targets of hard hits (I believe Baytex was right beside them?) on the required hedging scheme which is one of the reasons they got outta the hedging rather quickly...

I'm sure someone better can give better specifics on the issues...

I was in (still hold) Twin Butte Energy shares, they were producing a free cash flow that more than doubled the lending liabilities costs even at low oil costs when the bank (I forget if it was Western or National) refused to re-new thier lending scheme and sunk the company even tho they were still profitable, but they were also very deep in the loans for their size, at about the same time Cardinal had the issue come up... I think the bank got like 2-3 pennies on the dollar calling in the debt which was stupid because the company was still profitable and within lending covenants... the shares still exist OTC altho there is nothing there outside of a name and a lawsuit of some sort, a private company was basically handed the assets. CJ is considered a 'low cost producer' TBE was an ultra low cost, I believe they were black at like $26 oil, CJ was/is mid 30s...

I also own Bonterra who still has a chunk of hedging requirements similar but deeper than CJ, before they can give shareholders returns, & Crescent Point also has hedges, but they have always played it safe and had a chunk of production hedged even without the bank lending requirements, at first I believe they did it as part of an internal purchase plan when they made several major purchases of land rights which they had to sell most of off a few years ago, when oil tanked in the 30-40s CPG still had some production being paid at 70 & 65, but when those came off they took a large hit and since they have tended to hold hedges much lower than the current traded price... (but again someone better can go in-depth on these issues as I'm aware of the issues but I kinda just glance over the specific notes when I see them)

Back to the main topic, I believe I'm correct in saying National and Western Bank were main lenders to the O&G sector specially to the middle to smaller names, the Big Banks moved quicker on looking down on energy investments, National really stepped up thier essential pullout when they had pressure put on them, Western held out a while longer but eventually had to up their game on lending requirements...