The ranks of financially stressed companies have swelled to a four-and-a-half year high as the sharp drop in oil prices batters energy companies, the Wall Street Journal reported on Saturday. The number of companies with the worst below-investment-grade debt ratings rose to 184 in February, the highest count since November 2010, and remained at that level in March, according to Moody’s Investors Service. That is a 16 percent increase over March 2014. The 25 oil-and-gas and oil-services companies listed accounted for 13.6 percent of the total this month, their highest share ever. Moody’s tally of stressed companies includes only U.S. nonfinancial firms rated B3 with a negative outlook for future ratings changes or lower. The B3 rating is six notches into junk territory. “If this trend increases, we might see more defaults in the energy sector,” said Julia Chursin, an associate analyst at Moody’s. (Subscription required.)
Looking for more information about the current distress in the oil industry? Read the feature article in the March edition of the ABI Journal, "The New Energy Crisis: Too Much of a Good Thing (Debt, That Is)."
For more on oil and gas bankruptcies, be sure to pick up a copy of ABI's When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy. Click here to order your copy.