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Coronavirus Adds New Peril Ahead of Shale Borrower Bank Meetings

  • Weak energy prices may weigh on borrowing-base revisions
  • Tight credit could lead to more energy restructurings
Drowning In Dirty Water, Permian Seeks A $22 Billion Lifeline
Photographer: Callaghan O'Hare/Bloomberg

Troubled oil and gas companies may have a hard time persuading their bankers to keep extending credit as the outlook darkens for energy, potentially leading to more bankruptcies in the already-beleaguered sector.

Lenders evaluate the value of oil reserves used as collateral for bank loans twice a year, a process that’s not likely to go well amid weak commodity prices, falling demand, shuttered capital markets and fears of coronavirus dampening global growth. Banks may cut their lending to cash-starved energy companies by 10% to 20% this spring, according to investors and analysts.