Source: Bloomberg, August 9, 2016
The worst may be yet to come for some strained oil services companies as $110 billion in debt, most of it junk rated, creeps closer to maturity.
“While some companies will be able to delay refinancing until business conditions improve, for the lowest-rated entities, onerous interest payments and required capital expenditure will consume cash balances and challenge their ability to wait it out,” Morris Borenstein, an assistant vice president at Moody’s, said.
Moody’s expects that more than one-third of the analyzed companies will be carrying debt loads that are more than 10 times higher than earnings this year.“Not surprisingly, these companies are most at risk for debt restructurings and defaults,” Borenstein wrote. “Refinancing needs across the sector are significant.”