HSBC Holdings Plc is discovering the oil crash extends far beyond the deserts of the Gulf, the plains of west Texas and the shale fields of North Dakota. Even a small energy company in Dublin can inflict pain.
The lender led a group of banks that extended up to $500 million three years ago to Petroceltic International Plc, helping the Irish oil and gas explorer develop its prized gas field in the southeast of Algeria. With the company now facing a collapse in energy prices and locked in a feud with an ex-Deutsche Bank AG trader-turned-activist shareholder, HSBC has sold its loans at about 30 percent of face value, according to people with knowledge of the sale.
HSBCâ€™s soured relationship with a client it once touted on the bankâ€™s website illustrates the boom-to-bust in energy lending driven by falling oil prices. While Europeâ€™s lenders say many of their loans are to industry giants that can ride out the slump, that still leaves $113 billion in lending to minnows, wildcatters and other junk-rated companies, Bank of America Corp. analysts wrote last month.
â€œA lot of these smaller, independent companies are really stressed under the current oil price,â€™â€™ said Victoria McCulloch, an energy analyst in Edinburgh with Royal Bank of Canada. â€œThis year is going to be tough for the banks that lent to them.â€
Petroceltic applied for protection from its creditors in Dublin this month through an Irish form of Chapter 11 bankruptcy. Worldview Capital Management LLP, an activist shareholder thatâ€™s been fighting for control since 2014, purchased the majority of its $233 million of outstanding debts the next day from HSBC and the International Finance Corp., a branch of the World Bank, the people said.
Worldview, controlled by a Bulgarian ex-Deutsche Bank proprietary trader named Angelo Moskov, paid about 30 cents on the dollar for the loans, inflicting losses of about $112 million on lead lender HSBC and IFC, according to the people. Sarah Marquer, a spokeswoman for HSBC, declined to comment.
on the sale of loans. Petrocelticâ€™s application to seek creditor protection made prospects of repaying loans â€œeven more uncertainâ€ and selling out to Worldview was in the IFCâ€™s best interests, Frederick Jones, a spokesman in Washington, said in an e-mail.