May 7, 2020 - Energy & Climate

Dallas Fed boss warns of oil-sector bankruptcies amid coronavirus crisis

Ben Geman

A pump jack operates in the Permian Basin near Odessa, Texas — Photo: Paul Ratje/AFP/Getty Images

Federal Reserve Bank of Dallas President Robert Kaplan told Yahoo Finance Wednesday that he expects a substantial number of bankruptcies in the U.S. oil sector despite the recently expanded access to Fed's Main Street Lending Facility.

How it works: "[T]hat program will be designed for companies that would be already be creditworthy," said Kaplan, whose district has a large number of energy companies.

"If you're a company on the other hand, that is more highly leveraged than that, concerned about insolvency and other credit issues ... it's not going to be able to access those programs."
"And there will be a substantial number of bankruptcies, restructurings that are going to have to happen, because so much of production is being shut in."

What we're watching: Other policy levers the Trump administration may try and use to prop up battered domestic producers.

Go deeper: Whiting Petroleum files for bankruptcy as coronavirus takes a bite out of the economy

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Dallas Fed boss warns of oil-sector bankruptcies amid coronavirus crisis

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