Wells Fargo officials say they are optimistic falling oil prices will be a net win for the economy, but "the entire credit organization is focused on how that might change," CFO John Shrewsberry says.
Hancock Holding will more than double the size of its loan-loss allowance for energy credits in the fourth quarter, compared to a quarter earlier, covering about 5% of the $21.6 billion-asset company's energy book, compared to just 2% at Sept. 30.
The prolonged oversupply of oil, now in excess of 1.2 million barrels a day, has prompted Moodys Investors Service to sharply lower its price assumptions on future oil and natural gas prices.
The Office of Financial Research reports that levels of debt-to-GDP have risen to pre-crisis highs, and that the resilience in most of the credit markets today could be short-lived as creditors reconsider their exposure.
A slowdown in refinancing activity will mean a slowdown in issuance of leveraged loans and high yield bonds in 2016, according to Michael Contopoulos, head of U.S. high yield and leveraged loan strategy at Bank of America Merrill Lynch.
CIFC, the largest U.S. CLO manager by number of deals, is raising its own capital to finance risk retention compliance.
The regulators' annual Shared National Credits review found nearly 10% of large, syndicated credits demonstrated some form of weakness, most of which were leveraged loans. But renewed concerns about energy loans also cropped up.
Portfolio managers dont feel any better about the market than they did three months ago, according to a survey compiled by the International Association of Credit Portfolio Managers.
In July, the met coal producer, looking to delever, revealed plans to suspend its dividend and cut costs. Now, it may be considering a debt restructuring, according to reports.
The final rule, which mandates a 32% reduction in carbon emissions by 2030, will lessen the reliance on coal as an energy source. While it could be litigated, it adds to selling pressure on companies already struggling with heavy debt and low prices.