Financial Advisor Magazine reports that the recent plunge in oil prices is causing many traders to treat the $27 billion of investment grade energy debt as junk. “Investors are demanding more yield premium to own the debt of high-grade companies including Transocean Ltd., Noble Corp. and Continental Resources Inc. than the average for bonds with the highest junk rating, according to data compiled by Bloomberg.”
The global surplus of petroleum, not only led to the drop of gas prices but the decline of investor’s returns on energy-company bonds. According to Bloomberg intelligence analyst, Spencer Cutter, “… unlike the 2008 price drop, which was a result of an economic shock, this is a result of excess supply and that’s not going away.”
Financial Advisor Magazine named five companies on the precipice of junk: Continental Resources, Transocean Ltd., Noble Corp., Weatherford International Plc and Superior Energy Services Inc. According to the report, Transocean has the most debt of the five companies.
The foregoing information, which is all publicly available on FA-Mag’s website, is being provided by The White Law Group.
The White Law Group is investigating the liability that brokerage firms may have for recommending high-risk, high yield, oil and gas bonds. Brokerage firms are required to perform due diligence on any investment they recommend and to ensure that all recommendations made are suitable for the investor in light of the investor’s age, investment experience, investment objectives, net worth, and income. To the extent that a brokerage firm fails to perform due diligence on a bond offering or recommends one unsuitably, the firm can be held responsible for the losses in a FINRA arbitration claim.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee. The firm represents investors in FINRA arbitration claims throughout the country.
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