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Distressed Debt: Energy Woes Continue As Oil & Gas Issuers Join Restructuring Watchlist

A host of U.S. energy companies joined LCD’s distressed debt Restructuring Watchlist last week, adding to an already hefty group of issuers from that still-struggling market segment.

The Watchlist tracks companies with recent credit defaults or downgrades into junk territory, issuers with debt trading at deeply distressed levels, as well as those that have recently hired restructuring advisors or entered into credit negotiations.

Joining the Watchlist last week:

  • Energy company Alta Mesa, which opted for a third-lien loan via a debt swap
  • Chaparral Energy, which hired an advisor after maxing out the remaining $141 million of its revolving credit line
  • Fairway, the New York City-based grocery chain, which said it is running out of cash
  • Midstates Petroleum, which like Chaparral drew down the remainder ($249 million) of its credit line
  • Auto-parts concern UCI Holdings, which missed a $17.25 million bond interest payment
  • Energy concern Venoco, which also skipped an interest payment ($13.7 million)
  • W/S Packaging, which said it might bust one of its loan covenants if the company does not amend the credit or receive a waiver from lenders.

These additions bring the Watchlist to 39 entries. More than half of those – 20 to be exact – hail from the oil & gas/energy sector, while another two are commodities/mining concerns.

distress ratio

More could well join. Oil prices are expected to remain relatively low for the near future, what with an OPEC production freeze – talk of which sparked a very brief rally in crude and U.S. stocks last week – most uncertain.

Longer-term, many U.S. debt issuers will face a steep climb over the next few years, with increasing amounts of high yield debt coming due, according to S&P.

LCD’s Restructuring Watchlist is compiled by Rachelle Kakouris andMatthew Fuller. It is published each week.

Check out LCD News, LCD’s subscription service, for full leveraged loan/high yield bond coverage.

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