Prepare For Additional Revolver Draws During Current Crisis

In the face of these unprecedented and uncertain days of COVID-19, financially stressed borrowers are expected to take every measure available to them to keep their businesses afloat. For borrowers with revolving credit lines, this has included drawing down unused availability to ensure immediate, and sometimes future, access to needed liquidity. In ordinary circumstances, a revolver provides a borrower flexibility to address changing cash flow needs on a cyclical or seasonal basis. Today, an untapped revolver may be a lifeline for a business struggling with the loss of cash flow. Continue reading “Prepare For Additional Revolver Draws During Current Crisis”

Next Wave of Oil and Gas Bankruptcies

A new wave of bankruptcy filings for leveraged oil and gas companies has begun and this time it may involve more prepacks and less optimism. Beginning in late 2015 and continuing through 2017, downtown Houston was filled with bankruptcy lawyers. Highly leveraged exploration and production (or E&P) companies had become crippled by falling oil prices and the resulting impact on the value of their producing and non-producing reserves in their borrowing bases. No one was immune from the effect: servicing companies, suppliers and vendors, mid-stream and up-stream alike, all operating in a changed market. Many of these borrowers, however, anticipated a near term upswing in the price of oil and commenced their chapter 11 cases with that in mind. For a period of time, they were right. In 2018, WTI Crude recovered above $60 per barrel and reached the mid-$70s as many oil and gas companies exited bankruptcy with improved balance sheets. The volume of oil and gas company bankruptcies declined dramatically from 2016 to 2018. But it didn’t last. Continue reading “Next Wave of Oil and Gas Bankruptcies”