The U.S. energy trade has asked the Federal Reserve to change the terms of a $600 billion lending facility so that oil and gasoline companies can use the funds to repay their ballooning debts, based on a letter.
The effort comes at a time of intensifying ache for the sector as U.S. crude oil futures traded in negative territory on Monday for the first time in history on worries of a massive supply glut. So far, the energy sector has largely missed out on federal support to companies hurt by the novel coronavirus financial disruption, but it’s hoping it can profit from the Fed’s Main Street Lending Program because of launch in the coming weeks.
The Fed has been deluged with nearly 2,000 letters seeking modifications to the rules of this system, under which the Fed will buy 95% of eligible bank loans to small- and medium-sized businesses.
The terms of that and different federal assistance schemes are under rising scrutiny amid worries that insufficient conditions are being placed on debtors and banks may dish out funds to corporations without the best need for the money.
The Independent Petroleum Association of America (IPAA) asked the Fed to rethink a provision that bars eligible debtors from using the cash to repay different loan balances and requires debtors to promise to repay the Fed before other debt of equal or lower precedence.