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Oil downgrades mean more high-yield debt ahead

Companies that provide drilling services are most at risk from slide in crude oil prices

Published Sun, Mar 1, 2015 · 09:50 PM
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BILLIONS of dollars of energy debt could be downgraded into the US junk market over the next 12 months, much of it from an oil sector struggling with the steep drop in crude prices.

With oil roughly 50 per cent less per barrel than just a few months ago - and no sign of a major uptick soon - a number of companies are expected to tumble from investment grade into high yield. Analysts are divided over what will happen to their debt, with some seeing a strong bid for energy bonds and others painting a gloomier picture, particularly for drilling companies.

Moody's last week downgraded offshore driller Transocean to Ba1 from Baa3, and it will fall into high-yield if S&P follows suit - which the agency has warned it may do. "…

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