Here’s how Struggling Oil & Gas Companies are Dealing with Debt

Numerous oil and gas companies have become hard pressed for cash during this ongoing oil-price crisis. Some of these companies have attempted to stave off debt obligations by releasing a new tier of debt. 1.5 lien, as the new debt would be called, offers investors a higher yield and rights to collateral assets in the event of bankruptcy. Such deals are not usually seen and typically only occur when a market is in a crunch.

Many investors who have already invested in the company are likely to be dismayed by this issuance of new debt. Some investors may have had their claim on collateral affected, or are receiving a lower yield, and are not happy that they are losing out to newer investors. It is also a rather clear sign that a company is desperate for cash and is trying to push off obligatory payments. This can be bad for the image of the firm, which can cause more damage to the perceived value of the company.

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