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Q4 Flash Report: Energy, Retail, Telecom Restructuring to Continue

By Kirk O'Neil | Published on December 23, 2019

Financial challenges are likely to lead companies in the energy, retail and telecommunications to seek restructurings out of court to avoid filing a bankruptcy petition next year.

The energy sector is still struggling from low oil and natural gas prices, which could result in more out-of-court restructurings by oil and gas companies in 2020.

Retailers will also continue to restructure outside of court, while certain telecommunications companies will roll out plans next year to deal with financial distress out of court to avoid Chapter 11.

Natural gas producers have been struggling with financial distress since February 2014 as Henry Hub natural gas prices declined to $2.34 per million British thermal units on Dec. 19 from a high of $8.15 per MMBTU on Feb. 10, 2014.

Pricing for West Texas Intermediate has been a brighter spot for oil producers in the fourth quarter as the price has risen to $61.30 per barrel on Dec. 19 from $52.62 per barrel on Oct. 2. But the fallout from a long-term decrease in prices from $105 per barrel in June 2014 will continue to force many oil producers to seek out-of-court restructurings.

Among the oil and natural gas exploration and production companies likely to try to stay out of court through a restructuring are Plano, Texas-based Vine Oil & Gas LP, Denver-based Antero Resources Corp. (AR), Oklahoma City-based Ascent Resources Utica Holdings LLC and Fort Worth-based Range Resources Corp. (RRC) Each of these companies’ credit ratings were downgraded in December by Moody’s Investors Service Inc. on increased refinancing risk and continued low gas prices.

Oil and gas technology company McDermott International Inc. (MDR) on Dec. 2 secured a forbearance agreement with lenders on debt as the Houston company works on a balance sheet restructuring.

Retailers hoping to stabilize their balance sheets out of court include wedding gown retailer David’s Bridal Inc., which on Nov. 4 completed a debt restructuring with its term loan lenders that include equity holder Oaktree Capital Management LP. The Conshohocken, Pa.-based company swapped $276 million in debt for equity in the transaction.

Expect women’s apparel retailer J. Jill Inc. (JILL), which began a restructuring earlier this year, to continue out-of-court measures in 2020 as it still struggles with its operating results. Moody’s wasn’t satisfied with the Quincy, Mass., company’s performance as it on Dec. 12 downgraded its credit ratings based on weaker-than-expected sales.

Covington, La., telecom company Globalstar Inc. (GSAT) in November completed a refinancing of its balance sheet by amending terms of its senior secured credit facility and securing a second-lien term loan to pay existing debt.

Frontier Communications Corp. (FTR) is seeking new direction as it considers a restructuring of its business and the Norwalk, Conn., company took the first step by replacing its CEO Daniel McCarthy with Bernie Han on Dec. 4.

 

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