Law firm Haynes and Boone said in a report released this week that a wave of oil and gas bankruptcies in North America is likely to continue this year as oil prices remain depressed and a new surge of COVID-19 cases threaten to stall any recovery in fuel demand, Reuters reported. Bankruptcies surged in the second quarter, including from major shale independents Chesapeake Energy and Whiting Petroleum, as oil prices collapsed due to the pandemic and a brief, unexpected price war between Saudi Arabia and Russia. There were 18 producer bankruptcies in the second quarter, according to a report compiled by law firm Haynes & Boone, the highest quarterly figure since the second quarter of 2016, when there were 34 bankruptcies. In total, 23 oil producers and 18 oilfield service firms have sought protection from creditors this year. U.S. crude oil futures are currently about $40 a barrel, a level that “is not a sufficient clearing price for many heavily leveraged shale producers,” the report said. In the second quarter alone, producers filing for bankruptcy held over $29 billion in debt, with shale pioneer Chesapeake Energy accounting for $9 billion of that. In total, exploration and production firms filing for bankruptcy this year have $30.6 billion in debt. Oilfield service firms that filed in 2020 had $23.8 billion in debt, led by Diamond Offshore Drilling at $11.8 billion. Read more.
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AMC Entertainment Holdings Inc. is set to announce a deal with bondholders that would allow private equity firm Silver Lake to jump up the repayment-priority line, setting the stage for another credit-market brawl as companies dealing with the fallout of COVID-19 seek to restructure their debts, Bloomberg News reported. The transaction, which is expected to launch in the coming days, would provide $200 million of new money and see subordinated bondholders exchange their securities at a discount for new second-lien notes, according to people with knowledge of the situation. It will also extend the maturity on $600 million of convertible bonds held by Silver Lake for two years in exchange for first-lien priority on certain collateral. A group of existing first-lien lenders including Apollo Global Management Inc., Ares Management Corp. and Eaton Vance Corp. are opposing the deal, arguing it benefits certain creditors over others at the expense of the company, said the people, who asked not to be identified discussing a private matter. The cinema chain has been trying to hash out an accord for weeks as it looks to raise cash, manage its more than $5 billion debt burden and avoid a potential bankruptcy.