USA Energy Companies are walking a thin line The last time that U.S. banks resorted to such extreme measures with energy companies was in the late-1980s when another oil-price collapse ravaged the industry.
Banks have mostly relied on loan restructuring processes that prioritize them as secured creditors with bondholders seeking control of the companies in the event of defaults.
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But such is the high level of debt and uncertainty pervading the global energy sector that lenders are being forced to take more dramatic steps.
U.S. energy companies are indebted to the tune of more than $200 billion, with loans mostly backed by oil and gas reserves. According to Moody's, the U.S. oil and gas industry has about $86 billion of rated debt due over the next four years, one of the highest for any sector.
The oil price crash makes it especially hard for these companies to comply with their debt obligations.
Meanwhile, the sector dominates the $1.5-trillion junk-bond industry with about one-third of high-yield energy bonds in distressed territory.