US Banks Take Action to Avoid Energy Company Loan Losses
(09 April 2020 – United States) Major US banks are preparing themselves to seize assets from energy companies on the verge on bankruptcy as the US shale boom begins to decline.
The industry as a whole owes approximately US$200 billion to banks and other financial institutions though loans secured against oil and gas reserves. Energy companies are suffering through a sharp decline in oil prices caused by the coronavirus pandemic, simmering OPEC conflict between Russia and Syria and oversupply with crude prices down more than 60 percent this year. As more energy companies exit the market, the banks themselves are now structuring their own independent energy companies in order to become the owners and operators of oil and gas in the US for the first time in history. JPMorgan, Wells Fargo, Bank of America and Citi are among the major banks currently in the process of establishing these companies and employing executive staff to oversee the day-to-day management of these organisations.
"Lenders have little choice but to take more dramatic steps. Banks can now believably wield the threat that they will foreclose on the company and its properties if they don't pay their loan back” said Haynes and Boone Restructuring Partner, Buddy Clark.
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