Thread by @doug_schweitzer

1x What happens if we don't immediately address the price differential?

I can tell you as a partner at the largest law firm in the world who practices in the area of bankruptcy and insolvency that this is worse than 2008 / 09 and 2014 /15. #ableg #cdnpoli calgarysun.com/opinion/column…

2× Right now - banks that loaned money to oil and gas companies and oilfield service companies are reviewing cashflow forecasts to see how badly they are exposed.

If it is bad (and with these differentials it is), banks retain accountants to do a "looksie". #ableg #cdnpoli

3x The "looksie" stage is when a company pays for the privilege (yes ... the company pays) of having an accountant figure out whether their company can be saved.

I can't begin describe what this is like for someone that might lose their job or company. #ableg #cdnpoli

4x Then the company and the bank bring in lawyers like me.

Can we negotiate? Is there room to save money and salvage the business (this usually involves people losing their jobs)?

The problem this time is that everyone has already cut to the bone. #ableg #cdnpoli

5x Companies are already running lean and don't have a huge amount of flexibility. You are then looking at a refinancing or merger / sale.

Banks can be patient but you are on the clock if you are running a negative cashflow and can't pay operating costs. #ableg #cdnpoli

6x The company then goes to the market to refinance in probably the toughest market in recent memory. So ... that's off the table.

Next you look at a sale. Buyers know you are on the ropes so why jump in right away. Many would rather wait for you to go bankrupt. #ableg #cdnpoli

7x Your company has now explored its options in one of the toughest markets around. No refinancing. No buyer.

The Bank then demands on its loan. If you are a small company, this usually ends in a receivership and auction / fire sale. #ableg #cdnpoli

8x Now ... what about the employees? Well some might be kept on to sell the assets but most will end up laid-off.

Generally, no severance packages in these situations. Just a chance at getting your last paycheck. #ableg #cdnpoli

9x The cycle usually hits oil field services first (most immediately impacted), oil and gas companies next and then the last cycle is real estate / warehouses.

If we're lucky, it doesn't get to residential real estate. The dominos always fall. #ableg #cdnpoli

10x There are many other restructuring options that could happen but this is a general path.

I could go on about the "vulture funds" based in New York that are likely buying up debt right now to take a run at Alberta companies. "Loan to own." #ableg #cdnpoli

11x This area is a little more complicated but by popular request a 101 on "vulture funds".

They buy debt for a discount... say $0.50 purchase price for every $1.00 that was originally loaned.

They then demand repayment of the full amount of the loan. #ableg #cdnpoli

12x When the company can't repay the loan, the vulture fund has options but it can "credit bid" to buy the company for the full face value of the loan.

Another bidder would have to exceed the value of the loan to be successful.

Win win for vulture fund. #ableg

13x There are lots of other moving parts but this wave is already starting and if we don't act now it'll be ugly in early 2019.

The feedback I'm getting everywhere is ring the alarm bells! #ableg #cdnpoli