Paul Jansen: Reserve-based Lending: The Evolution Through the Downturn – Oil & Gas Financial Journal
Paul Jansen wrote an article that was published in the Oil & Gas Financial Journal titled “Reserve-based Lending: The Evolution Through the Downturn.”
Throughout 2015 and 2016, more than 90 energy companies filed for Chapter 11 bankruptcy protection and restructured more than $70 billion in debt. As commodity prices began their decline in the second half of 2014, upstream reserve values fell precipitously, resulting in the significant reduction of reserve based loan (RBL) capacities across the industry. The reduction in loan capacities left many borrowers over-advanced in their RBL facilities and their respective lenders exposed to increased credit risk. As the energy industry experienced a collective balance sheet restructuring, the Shared National Credits (SNC) program undertook a review of RBL practices and loan classifications. The results of the SNC review led to a March 2016 pronouncement issued by the Office of the Comptroller of the Currency (OCC) that proposed changes to RBL underwriting analysis and loan risk rating determinations by national banks and federal savings associations (collectively, banks).