Some selected excerpts about the banks - source CNBC This has...

Some selected excerpts about the banks - source CNBC

This has gotten ugly as OPEC decide to play a game of chicken with the world.

Should be interesting to watch.

I continue to hold.

Cheers
BW
_______________________________
And then is heard no more. It is a tale
Told by an idiot, full of sound and fury
Signifying nothing.


Banks including Barclays and Wells Fargo are facing potentially heavy losses on an $850 million loan made to two oil and gas companies, in a sign of how the dramatic slide in the price of oil is beginning to reverberate through the wider economy.


The price slide is having a serious impact on oil producers that rely on revenues from crude exports to balance their budgets. The Russian rouble has lost 27 per cent of its value since mid-June, when crude began to fall, while the Norwegian krone is down 12 per cent and on Wednesday the Nigerian naira touched a record low.

The company has suffered from an oversupply of rigs as the majors respond to crude's slide by cancelling projects.

Now banks are also being affected, with Barclays and Wells said to face potential losses on an energy-related loan. Earlier this year, the two banks led an $850 million "bridge loan" to help fund the merger of Sabine Oil & Gas and Forest Oil, U.S.-based oil companies.

Sabine's bonds were trading above their face value at around $105.25 in June, but have since fallen to $94.25 - firmly in "distressed" territory. Their yield - which moves inversely to price - has jumped from around 7.05 per cent to 13.4 per cent.

Rival bankers estimate that if Barclays and Wells attempted to syndicate the $850m loan now, it could go for as little as 60 cents on the dollar.

If the banks are not able to sell the loan they may absorb it on their balance sheets, rather than try to sell it into the market.

Marty Fridson, chief investment officer at LLF Advisors, says that of the 180 distressed bonds in the Bank of America Merrill Lynch high-yield index, 52, or nearly 29 per cent, were issued by energy companies.

Details of the loan come amid concerns about the impact that the oil price fall could have on credit markets and as US regulators have discouraged banks from making riskier loans.

The energy sector accounts for 4.6 per cent of outstanding leveraged loans, up from 3.1 per cent a decade ago, according to S&P Capital IQ. Energy bonds make up 15.7 per cent of the $1.3tn junk bond market, according to Barclays data - compared with 4.3 per cent a decade ago.