May 17, 2016
Oil and gas companies are putting the credit worthiness of potential business parties under a microscope. Companies want to limit the credit risks associated with setting up a joint venture in order to keep their business and assets safe. In an article in the Financial Post, Drew Hasselback discusses how lawyers for these companies are working to reduce financial risks.
One way is by restructuring credit support agreements to include terms that protect clients. Janice Buckingham, Chair of Osler’s Oil and Gas Practice and Co-lead of the Energy Practice says, “[a] number of these tools have been around for years. We’re just thinking about them more because of the increased market risks at present.”
Credit support is especially important for long-term arrangements. To alleviate worry, many companies are asking for up-front payments before agreeing to close a deal and others are beginning to base the availability of rights on a potential party’s credit rating. Some companies are also restricting parties from assigning their rights to a company outside the scope of the deal.
Read the full article, “Credit support agreements under microscope amid pressure to derisk” at the Financial Post.