Climbing oil prices shield most U.S. drillers from default, Fitch says

Rising oil prices have probably shielded most U.S. drillers from debt defaults next year, Fitch Ratings says.

Energy companies have defaulted on $7.7 billion in leveraged loans, a certain category of higher-risk loans sold to investors, the credit rating agency said in a new report Tuesday. Fitch is majority-owned by Hearst Corp., the parent company of the Houston Chronicle.

That’s out of the $40 billion in leveraged loans they ran up to fuel the shale oil boom. Companies also defaulted on $40 billion of the $254 billion in risky corporate bonds they’ve taken out in recent years, said Eric Rosenthal, senior director of leveraged finance at Fitch.

But the oil industry’s financial prospects could improve next year, he said, as crude prices rise above $45 a barrel. Almost half of the leverage loans Fitch believes are at risk of default are tied to the energy industry, but the firm expects only a few drillers to default next year.

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