Crude oil crash exposes energy firms that binged on debt

From Indian tycoon Anil Agarwal’s metals and mining company to American shale explorers, the historic crash in oil prices has left energy companies that loaded up on debt vulnerable.

With a global recession looking increasingly likely, commodities firms whose finances were already crumbling due to the outbreak of the coronavirus are suddenly on even shakier ground. In the US, defaults by energy companies are likely to exceed the 2016 peak and the risk of so-called fallen angels – or companies that go from investment-grade to junk – has risen, according to Morgan Stanley.

As investors flee risk in credit markets, companies are faced with looming debt bills. Energy and power generation firms globally have about $88 billion of US currency bonds due this year, and the cost to roll over debt has risen, with financial markets seizing up.