May 7, 2020 - Energy & Environment

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

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.

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