Most oil producers would welcome higher crude prices, after a two-year downturn has pushed more than 100 U.S. energy companies into bankruptcy, but for some distressed drillers, a rebound could actually make things worse, MSNBC.com reported on Friday. Throughout the rout in oil prices, senior lenders have largely been able to dictate the terms of energy bankruptcy proceedings as drillers' assets have fallen in value. But when oil prices rise, so does the value of a company's reserves. That in turn can prompt so-called junior creditors to challenge restructuring plans in a bid to get a bigger piece of what's left of the pie. High oil prices "embolden junior classes to fight harder, meaning possibly fewer agreements, and hence more need for a court process to resolve the issues," said Patrick Hughes, a Denver-based bankruptcy lawyer at Haynes and Boone. Last year, creditors recovered just 21 percent of the capital they lent to 15 bankrupt oil and gas exploration and production companies with at least $100 million in debt, Moody's Investors Service reported this month. That compares with a historical average recovery rate of nearly 59 percent. Read more.
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