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Bad Loans to Outnumber the Good for American Oil Producers
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K
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25 Mar ’16 - 10:39 am
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wonder if there will be a bailout

Bad loans are likely to outnumber good ones soon in the U.S. oil patch, an indication of the pressure on energy companies and their lenders from the crash in prices.

The number of energy loans labeled as “classified,” or in danger of default, is on course to extend above 50% this year at several major banks, including Wells Fargo & Co. andComerica Inc., according to bankers and others in the industry.

In response, several major banks are reducing their exposure to the energy sector by attempting to sell off souring loans, declining to renew them or clamping down on the ability of oil and gas companies to tap credit lines for cash, according to more than a dozen bankers, lawyers and others familiar with the plans.

The pullback is curtailing the flow of money to companies struggling to survive a prolonged stretch of low prices, likely quickening the path to bankruptcy for some firms.

Fifty-one North American oil-and-gas producers have already filed for bankruptcy since the start of 2015, cases totaling $17.4 billion in cumulative debt, according to law firm Haynes and Boone LLP. That trails the number from September 2008 to December 2009 during the global financial crisis, when there were 62 filings, but is expected to grow: About 175 companies are at high risk of not being able to meet loan covenants, according to Deloitte LLP.

“This has the makings of a gigantic funding crisis” for energy companies, said William Snyder, head of Deloitte’s U.S. restructuring unit. If oil prices, which closed at $39.79 a barrel Wednesday, remain at around $40 a barrel this year, “that’s fairly catastrophic.”

more http://www.wsj.com/a.....1458840050

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Gravel Road
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25 Mar ’16 - 1:30 pm
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Where did the free market go?  Businesses fail every day.  I bet they have a lot of cash reserves from the extensive profits they have made. A bail out would be total garbage (but, they will probably get it).

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jonathco
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25 Mar ’16 - 6:45 pm
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Gravel Road said
Where did the free market go?  Businesses fail every day.  I bet they have a lot of cash reserves from the extensive profits they have made. A bail out would be total garbage (but, they will probably get it).

Well said, it's time for the government to stop picking winners and losers and let the market do what it does best. Imagine how much less debt this country would be in if we stopped bailing out companies when they are stupid, fighting wars that are not our own, and stopped locking people up for victim-less crimes.

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Gravel Road
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25 Mar ’16 - 7:05 pm
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FREE MARKET....It's a simple concept.  This is old school...Watch it all the way through...I bet you will like it!

https://www.youtube.com/watch?v=ZhWgDVS-AdA

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26 Mar ’16 - 8:11 am
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jonathco said

Gravel Road said
Where did the free market go?  Businesses fail every day.  I bet they have a lot of cash reserves from the extensive profits they have made. A bail out would be total garbage (but, they will probably get it).

Well said, it's time for the government to stop picking winners and losers and let the market do what it does best. Imagine how much less debt this country would be in if we stopped bailing out companies when they are stupid, fighting wars that are not our own, and stopped locking people up for victim-less crimes.

when are you going to be on the ballot?

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Gravel Road
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26 Mar ’16 - 6:04 pm
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Personally, as Batman...I just don't have the time.

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27 Mar ’16 - 8:15 am
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he's the politician Gotham deserves, but not the one it needs right now

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DangerDuke
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28 Mar ’16 - 12:45 pm
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Great post GR. This is literally the problem we have worldwide today. The global economy is in recession because of two things: government ability to influence the free market, and an overabundance of social programs causing a lack of productivity.

 

Just like when you take away risk as an incentive for companies to remain efficient and make productive decisions, when you take away risk from an individual by providing for their wants and needs at the expense of others you remove their incentive to be productive and make efficient financial decisions. Many young people today don't even remotely understand the concepts of basic economics, which is why we are seeing so many young people in favor of socialism, even though they know nothing about it.

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