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Oil producer may have to file Chapter 11

Throughout the years we have seen certain industries being hit hard at one time or another. It seems that quite a few companies in the energy industry are feeling the heat currently, as quite a few have announced efforts to restructure their debt.

The latest company to announce a potential Chapter 11 filing is Linn Energy, an oil producer. The company apparently recently defaulted on a $3.6 billion credit agreement. This default could potentially lead to a Chapter 11 bankruptcy filing.

Basically, the company has a certain set grace period in which it has to meet its requirements. If the company does not pay within that time, the creditors may demand full payment of the debt. This request could trigger the company to default on other loans and eventually force the company into bankruptcy. The company basically explained that it would not have “sufficient liquidity” to repay the loans if the creditors push for payment.

Revenues for the company were at $2.2 billion at the end of 2014 but dropped to $647 million at the end of 2015. Production also fell by 16 percent in that timeframe. The company has announced that it will be shutting down some 1,000 marginal wells this year.

The hope is that this company can make the payment that is set up in the credit agreement. If it is not able to do so, it may seek the protections provided to it by the bankruptcy court. These protections can allow the company to restructure and hopefully come out stronger in the end.

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