The longer the energy rout lasts, the less willing lenders are to accommodate companies that fail to make their payments.TODD KOROL/Reuters
Lenders have been relatively tolerant of indebted oil companies amid the crude-price collapse, but now their patience is wearing thin.
They showed their limits on Thursday, when a lending syndicate pushed debt-heavy junior producer Spyglass Resources Corp. into receivership.
Spyglass said an Alberta court granted the lenders' application, which went unopposed by the company's board, chaired by Calgary energy veteran Tom Buchanan.
The company, formed in early 2013 in the merger of three junior producers, said the directors resigned.
The company acknowledged it would fail to make a mandated $35-million payment on its credit facility by Nov. 30.
Its struggles with high debt predated the energy downturn.
The shares last traded at 5 cents on the Toronto Stock Exchange, representing a loss of 93 per cent in the past year.
This year, banks and other lenders have been largely willing to make accommodations for companies that have fallen afoul of debt covenants by renegotiating terms as crude markets have sputtered.
Analysts say, however, that the longer the rout lasts, the less willing they will be to give companies time to cut debt through asset sales and other means.
More producers are expected to meet the same fate as Spyglass.
At the end of the third quarter, Spyglass had $175-million in net debt. That compares with a market capitalization of $6.4-million.
In early November, its $100-million credit facility was amended to limit the company's ability to use it.
The company warned at the time that it could still fail to meet its covenants.
Meanwhile, it had engaged National Bank Financial to sell a large package of producing properties.