RE:RE:opec will soon tire of producing twice the oil for the same
Speaking of rules, I'm C&Ping this little blip. The point that I took, which had not be one of the dots I had been connecting, was the regulatory pressure on Banks for Debt Ratios and much like a Margin Call, it must be obeyed.>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>Against this challenging backdrop, we bring you the following commentary from Emanuel Grillo, partner at Baker Botts's bankruptcy and restructuring practice who spoke to Bloomberg Brief last week. * * * Via Bloomberg Brief How does the second half of this year look when it comes to energy bankruptcies? A: People are coming to realize that the market is not likely to improve. At the end of September, companies will know about their bank loan redeterminations and youll see a bunch of restructurings. And, as the last of the hedges start to burn off and you cant buy them for $80 a barrel any longer, then youre in a tough place. The bottom line is that if oil prices dont increase, it could very well be that the next six months to nine months will be worse than the last six months. Some had an ability to borrow, and you saw other people go out and restructure. But the options are going to become fewer and smaller the longer you wait. Are there good deals on the horizon for distressed investors? A: The markets are awash in capital, but you still have a disconnect between buyers and sellers. Sellers, the guys who operate these companies, are hoping they can hang on. Buyers want to pay bargain-basement prices. Theres not enough pressure on the sellers yet. But I think thats coming. Banks will be redetermining their borrowing bases again in October. Will they be as lenient this time around as they were in April? A: I dont know if youll get the same slack in October as in April, absent a turnaround in the market price for oil. Its going to be that come-to-Jesus point in time where its about how much longer can they let it play. If the banks get too aggressive, theyre going to hurt the value for themselves and their ability to exit. So theyre playing a balancing act. They know what pressure theyre facing from a regulatory perspective. At the same time, if they push too far in that direction, toward complying with the regulatory side and getting out, then theyre going to hurt themselves in terms of what their own recovery is going to be. All of the banks have these loans under very close scrutiny right now. Theyd all get out tomorrow if they could. Thats the sense theyre giving off to the marketplace, because the numbers are just not supporting what they need to have from a regulatory perspective.