Two oil companies failed to pay interest on their bonds, bankruptcy looms - from TRUNEWS

(TRUNEWS) Two major oil companies failed to pay interests on their bonds last week, signaling trouble that may lead to bankruptcy.

Energy XXI Ltd. and SandRidge Energy Inc. have until mid-March to pay the interest or work out a deal with creditors. They are $7.6 billion in debt combined.  Bankruptcy could be on the horizon.

If that happens, it would be the biggest grouping of oil and gas defaults in a month since a drop in energy prices early last year, according to Bloomberg Business.

The shale increase in the U.S. was sustained by junk debt. Companies spent more on drilling than they earned by selling.  About $237 billion was borrowed by drillers.

Now that oil prices have fallen 70 percent since 2014, banks and bondholders are panicking, which has been reflected in bond prices.

High yield energy debt lost 24 percent last year, its biggest decline since 2008.

Energy XXI owes $150 million to Royal Bank of Scotland, UBS Group AG and BNP Paribas SA. SandRidge has credit with Barclays, Royal Bank of Canada and Morgan Stanley.

Analysts believe problems with other oil companies are coming. The number of groups at risk of default is nearing the 2008 peak, according to a report by Moody’s.

Banks are setting aside money to cover impending losses, as reported by Bloomberg, and credit lines could be cut by 30 percent in the next month.

The post Two oil companies failed to pay interest on their bonds, bankruptcy looms appeared first on TRUNEWS with Rick Wiles.

from TRUNEWS with Rick Wiles http://ift.tt/24rewSB
via IFTTT