Bankruptcy Recovery Rates in the Energy Sector ‘Worst Bust of Any Industry this Century’

The coverage ratio is complete horseshit. You keep prancing around buying stocks of companies who have dick to door knobs to cover all of the debt coming due. Moody’s did an analysis on 15 energy companies gone bust in 2015 and found that the recovery rate for creditors was an abhorrent 21 cents on the dollar, the absolute worst since the telecom bust of 2001.

This is viewed by the credit rating agency as ‘catastrophic’ and is well below the 59% norm of past decades.

The high yield space was even worse, almost a complete bust at 6%–compared to the norm of 30%.

The prevailing view by most analysts, as well as Moody’s, is that the worst is behind us and that oil prices have stabilized and are going up. I cannot tell you how many times I’ve heard this manure coming out of the mouths of men.

The simple fact of the matter is, the balance sheets of the current energy sector is just about the worst ever, dating back to the dot com bust. If prices drop back down into the 20s, for whatever reason, you’re looking at a credit meltdown of monumental proportions.

Let us all pray to the Lord that the House of Saud prevail in gerrymandering the price of crude sharply higher, just in time for X-mas.