A prolonged period of depressed oil prices could put additional pressure on business development companies, which specialise in lending to middle market companies and are already feeling the pinch from portfolio yield compression and dividend cuts, bankers said. Oil prices have plunged 60% since June and are not expected to rebound meaningfully before at least 2016. This scenario will sap cash flows of portfolio companies whose revenues are heavily tied to oil exploration, production and oilfield services, and could limit the ability of certain borrowers to service debt.
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