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American oil and gas companies have gone heavily into debt during the energy boom, increasing their borrowings by 55 percent since 2010, to almost $200 billion, the Wall Street Journal reported today. Their need to service that debt helps explain why U.S. producers plan to continue pumping oil even as crude trades for less than $50 a barrel, down 55 percent since last June. But signs of strain are building in the oil patch, where revenue growth hasn’t kept pace with borrowing. On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money and citing debt of between $10 million and $50 million. Energy analysts warn defaults could be coming. “The group is not positioned for this downturn,” said Daniel Katzenberg, an analyst at Robert W. Baird & Co. “There are too many ugly balance sheets.” (Subscription required.)
http://www.wsj.com/articles/deep-debt-keeps-oil-firms-pumping-142059443…

For further analysis of oil and gas company bankruptcy, make sure to pick up a copy of When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy available in the ABI Bookstore.

RadioShack Corp. said that it hired an advisory and management services firm days after the company again warned that it could be forced to seek bankruptcy protection and to possibly liquidate, the Wall Street Journal reported today. The company, in a filing today, said that it reached an agreement for advisory and interim management services with FTI Consulting yesterday. As part of the agreement, Carlin Adrianopoli, who has served in FTI’s corporate finance and restructuring practice since 2010, will take over as the struggling electronics chain’s interim chief financial officer. He replaces Holly Etlin in that role.

Monarch Alternative Capital LP abandoned negotiations to take over a $140 million loan to RadioShack Corp. as the electronics retailer struggled to reach a deal with lenders on a turnaround plan, Bloomberg News reported yesterday. Monarch, run by Michael Weinstock, backed out of talks it was leading with two other hedge funds to acquire the asset-backed senior loan and renegotiate the terms. The company continues to talk with the other funds and with other potential lenders. RadioShack is seeking to refinance the debt to loosen terms that may restrict the amount it can borrow under the loan in March. That would give the company time to implement a turnaround plan and avoid a cash crunch that management said in a Sept. 11 regulatory filing may lead to bankruptcy. The loan is part of a $585 million funding package arranged last month by RadioShack’s largest shareholder, Standard General LP, that gave the retailer enough cash to operate through the holiday season. Any deal to refinance the debt will be contingent on whether a key RadioShack lender, Salus Capital LLC, agrees to a company plan to close underperforming stores, one of the people said. Salus owns part of a $250 million, second-lien loan.

Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig said that global banks should set up shields for certain short-term funding deals as a step toward ensuring they can be dismantled in U.S. courts after a failure, Bloomberg News reported yesterday. Hoenig called on banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. to look at protecting funding such as repurchase agreements with a system similar to one announced last month that will delay termination of derivatives contracts during a U.S. financial-firm bankruptcy. Industry-driven stays “may be needed for those parts of the repo book that use long-term assets to secure short-term funding,” Hoenig said. “Volatile wholesale funding” at banks’ broker-dealer units is most vulnerable to runs across borders and firms, he said. Banks must prepare for the possibility that broker-dealers could enter bankruptcy and need sufficient financing as part of “living wills” required under the Dodd-Frank Act, Hoenig said. The FDIC and Federal Reserve, which can force business changes at banks that don’t come up with credible plans, found fault with submissions by 11 of the largest banks.

Richmond Federal Reserve Bank President Jeffrey Lacker said that federal financial regulators must remove the implicit view from creditors that the government will step in to protect large financial institutions, and better adapt the Bankruptcy Code to these firms, Reuters reported yesterday. Lacker called for the repeal of the Fed's remaining emergency lending powers and further restraining the central bank's ability to lend to failing institutions. He added that the Bankruptcy Code, properly applied to financial institutions, would then no longer require the Federal Deposit Insurance Corp.’s involvement in winding down big banks. "Once robust and credible resolution plans are in place, we would be able to responsibly wind down the FDIC’s Orderly Liquidation Authority and related financing mechanisms," Lacker said. To read Lacker’s full speech, please click here: https://www.richmondfed.org/press_room/speeches/president_jeff_lacker/2…

RadioShack has hired former Treasury Department adviser Harry J. Wilson to help with its turnaround efforts, the Associated Press reported yesterday. The struggling consumer electronics retailer said yesterday that Wilson will serve as chief revitalization officer, reporting to its board and CEO Joe Magnacca. Wilson is the founder and CEO of The Maeva Group. He previously served as a senior adviser in the Treasury Department and was a senior member of the Auto Task Force, which was responsible for the Treasury’s role in the restructuring of General Motors and Chrysler. RadioShack warned in September that it might need to file for chapter 11 protection as it struggles to compete with online retailers.

At the time it filed for bankruptcy on July 23, the Truland Group was the 10th largest electrical contractor in the U.S. and had roughly 1,000 employees working on more than 250 construction projects around the country — including some of the most high-profile developments in the Washington, D.C. area, the Washington Post reported on Saturday. Last Wednesday, there were few signs of a once-bustling business at two of the company’s Virginia offices. Truland is working its way through the initial stages of a chapter 7 bankruptcy that could bring about the end of a family-owned business whose roots in the region date back more than 100 years. Its shutdown is creating ripple effects across the D.C. region, impacting not just hundreds of laid-off Truland employees — many of whose paychecks have bounced — but dozens of construction companies that hired Truland to do electrical work on condos, office buildings, hospitals, hotels and schools. Many are now hustling to find replacement subcontractors and looking to recoup costs from Truland’s insurance companies.

The judge overseeing Nortel Networks Inc.’s bankruptcy said he may pressure creditors fighting over $7 billion to reach a deal in a closed-door meeting, Bloomberg News reported yesterday. Bankruptcy Judge Kevin Gross told U.S. bondholders and a monitor for Nortel’s Canadian parent in a court hearing on Friday that he wanted to meet with them for several hours and proposed an October date. Gross said that the meeting in his chambers won’t be a formal mediation session. “I am going to provide some direction and perhaps some pressure,” the judge told lawyers. The monitor for the bankrupt parent company and creditors in Canada and the U.K. have been fighting with U.S. bondholders and the bankrupt U.S. unit over how to split $7 billion in cash raised as Nortel liquidated its assets since filing bankruptcy in 2009. Judge Gross said that the meeting would be the night before a still unscheduled court fight between the bondholders and the Canadian monitor over a proposal to pay the bondholders as much as $1 billion in interest.

Zodiac Pool Solutions SAS, a supplier of swimming pool products controlled by asset manager Carlyle Group LP, filed for U.S. bankruptcy court protection seeking recognition of U.K. court proceedings on its debts, Bloomberg News reported yesterday. The company listed assets of as much as $1 billion and debt of more than $1 billion in chapter 15 documents filed yesterday. Under a U.K. “scheme of arrangement,” the company will make a 145 million-euro ($194 million) payment and some debt maturities will be amended and extended. Zodiac’s creditors “voted substantially in favor” of the U.K. plan, according to U.S. court papers.

Dutch coal miner New World Resources NV filed for bankruptcy protection in a U.S. court on Wednesday while officials negotiate cuts to the roughly EUR825 million ($1.1 billion) debt owed by the company, which has struggled to profit amid depressed global coal prices, Dow Jones Daily Bankruptcy Review reported today. New World Resources, whose operating subsidiaries mine for coal in the Upper-Silesian coal basin in Czech Republic and Poland, filed for chapter 15 protection. The company filed the case to block bondholders who are unhappy with the repayment terms of a proposed restructuring plan from filing a U.S. lawsuit to stop it. A British court has already approved the proposed restructuring plan.