The rush of energy companies executing workout agreements or filing for bankruptcy dramatically slowed a few years ago, as the price of oil increased and businesses discovered new oil and gas fields in South Texas. However, given the uncertainty of oil and gas pricing and the increasing costs of drilling and completing oil and gas wells, financial pressures again may begin to increase, meaning that lawyers for lenders to energy companies may find their loan documents under the bankruptcy microscope.
That microscope will zoom in on any payments to creditorsin the 90 days prior to any bankruptcy filing that the debtor thus can avoid as a preference. It also will disclose any liens that are not perfected and that the debtor thus can avoid. In other words, it may reveal the creditors’ inability to obtain the full value of the collateral underlying the loan.
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