Moody's: Junk Energy Firms Feel Unprecedented Liquidity Pinch

Moody's Investors Service said that a record number of speculative-grade companies experienced deteriorating liquidity in February, led by the oil and gas sector, as weakness in energy prices cut into cash flows and the ability to raise capital, Bloomberg Brief reported today. Of the 25 companies that received "liquidity downgrades" from Moody's in February, 17 were energy explorers and producers, the credit grader said in a Tuesday report. A 31 percent plunge in oil prices over the past year helped drive the moves. The Moody's Oil & Gas Liquidity-Stress Index, which rises as financing becomes more difficult, reached 27.2 percent in February, surpassing the previous high of 24.5 percent set during the global financial crisis in 2009, Moody's data show. The gauge for all non-investment companies jumped to 8.9 percent in February from 7.9 percent in January, according to Moody's data. That's above the long-term average of 6.7 percent but below the all-time high of 20.8 percent in March 2008, Moody's reported.

Will exploration and production hit bottom in 2016? Be sure to attend ABI's Annual Spring Meeting in Washington, D.C., from April 14-17, as a panel of experts will be addressing this topic. Register today!

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt with ABI's When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy.

Watch Now: Video Provides Recap and Analysis of Oral Argument in In re Ritz

How did the late Justice Scalia's absence impact the oral argument in In re Ritz? Why is this bankruptcy case important? Watch ABI Editor-at-Large Bill Rochelle provide his take on the March 1 oral argument, including a potential outcome of the case.

For further analysis, read Bill's full recap of the oral argument in Rochelle's Daily Wire, appearing in ABI's Newsroom.

Chicago Schools Fast Running Out of Cash as Standoff with Illinois Governor Worsens

Chicago's cash-starved public schools' district may be choked off from more loans and could find itself unable to meet a $676 million pension payment in June because of a deepening legal dispute with Illinois' governor, Reuters reported today. The state's school board, stocked with Republican Governor Bruce Rauner's appointees, is expected to declare Chicago's school system in "financial difficulty" as early as April under an Illinois law authorizing state takeovers of financially distressed school systems. Rauner, who is seeking to take over the schools' district, contends that such a finding would bar the nation's third-largest public school system from further borrowing. Chicago Public Schools (CPS), which only just borrowed $725 million through a bond sale, says it is exempt from the law, thus keeping Rauner and his State Board of Education from dictating financial decisions involving the system, including its ability to borrow additional funds. CPS plans to tap an existing $370 million credit line with Barclays Bank to help pay its June 30 pension obligation, according to Moody's Investors Service analyst Mark Lazarus. But that move could also be in jeopardy because of Rauner's stance.

Federal Regulators Concerned Municipal Bonds Would Be a Tough Sell in Event of a Crisis

Many investors flock to municipal bonds for security, but some federal regulators trying to shore up the banking system aren't convinced that the bonds would be easy to sell in a crisis, the Wall Street Journal reported yesterday. The contrast has led to an unusual showdown, with Wall Street, Congress and municipal officials -- all of whom are vested in a robust muni-bond market -- challenging bank regulators' skepticism toward municipal debt. At issue are new rules aimed at ensuring banks can raise enough cash during a financial-market meltdown to fund their operations for 30 days. The requirements mean that banks have to hold more cash or securities that are easily sellable. The Federal Reserve and two other bank regulators decided that debt issued by states and localities didn't make the cut, when they crafted the rules in 2014. Now, Republicans and Democrats alike are advancing legislation to mandate that regulators include municipal securities among the rule’s definition of "high-quality liquid assets," a category that currently includes cash, Treasury bonds and debt sold by government-sponsored enterprises like Fannie Mae. The House passed such a bill last month. Sens. Mike Rounds (R-S.D.), Charles Schumer (D-N.Y.) and Mark Warner (D-Va.) are leading the charge in the Senate to work on related legislation.

Anchors Away: Malls Lose More Department Store Tenants

The rise of online shopping and changing consumer habits are battering the big department stores known as anchors that once lured shoppers to malls -- leaving landlords with empty space and forcing them to undertake expensive overhauls to stay relevant, according to a Wall Street Journal analysis on Friday. Macy's, which reported a 31 percent decline in fourth-quarter earnings last Tuesday, in January said it would be closing nearly 40 locations. Sears Holdings Corp. and J.C. Penney Co. are also closing stores. Many other so-called anchor stores are limping along with little foot traffic. Department-store chains would need to close about 500 stores -- equal to about 15 percent of all anchor space at U.S. malls -- to generate as much sales a square foot as they did in 2006, according to a recent report from Green Street Advisors, a real-estate research firm.

Don’t miss the "Everything-Must-Go Sale: The Ins and Outs of Retail Bankruptcies" at ABI’s Bankruptcy Battleground West next Friday in Los Angeles. Click here to register.

Survey: Law Student Debt Levels on the Rise

A recent survey of nearly 22,000 students by the Indiana University's Center for Postsecondary Research found that 44 percent of law students expect to graduate owing more than $100,000 in student loans, the National Law Journal reported on Monday. Nearly 67 percent of those hefty borrowers anticipate they will leave law school with more than $120,000 in debt -- up from 63 percent in 2011. The latest iteration of the Law School Survey of Student Engagement focuses on student loan debt over the past 10 years and how that debt impacts law students while on campus. The survey, which included responses from 80 campuses, found that debt levels are increasing, are contributing to law student stress, and are hitting minority and lower-income students the hardest.

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