July 14, 2016 Comments (0) Current Investigations

Investor Alert: Bonanza Creek Energy

(Last Updated On: January 11, 2017)

Have you suffered losses investing in Bonanza Creek Energy 6.75% 04/15/21 bonds? If so, The White Law Group may be able to help.

Bonanza Creek Energy, Inc. is a Denver-based independent oil and natural gas company engaged in the acquisition, exploration, development, and production of onshore oil and associated liquids-rich natural gas in the United States.

On July 13th Bonanza Creek Energy disclosed it had hired a financial adviser to help it explore alternatives, including a restructuring. According to papers filed with the SEC, Bonanza Creek has retained Perella Weinberg Partners, a New York firm known for working with companies in financial trouble.

Shares of Bonanza Creek closed at $1.44/share,  a 36.8 percent decline after investors heard the news. Shares of the company had traded above $60 in August 2014, a few months before Saudi Arabia said it would no longer limit its production to support prices. That set off a steep descent in oil prices from above $100 a barrel to briefly under $30.

Oil is now back around $45 a barrel. But lenders are reducing the credit they are willing to extend to producers given the lower value of their oil and gas reserves.

Bonanza Creek said in late May that the amount it could borrow under its credit agreement was cut from $475 million to $200 million. That was a problem because the company had borrowed $288 million, leaving it with a deficit of $88 million.

Bonanza Creek, like many petroleum producers, initially turned to the equity markets to help it stay afloat. The company raised more than $200 million in a secondary offering back in February 2015 to investors willing to pay $26 a share.

High-yield bonds—also called non-investment-grade bonds, speculative-grade bonds, or junk bonds—are bonds that are rated below investment grade, typically ‘BB’ or lower by Standard & Poor’s and ‘Ba’ or lower by Moody’s. They pay high yields to bondholders because the borrowers credit ratings are less than pristine, making it difficult for them to acquire capital at an inexpensive cost. Junk bonds carry an above average risk that the issuer will default on the bond. The increased risk makes them arguably unsuitable for many investors.

Brokerage firms that sell such products are required to perform adequate due diligence on the investments to ensure a reasonable likelihood of success, and to evaluate whether the investments are suitable in light of the client’s age, net worth, investment experience, and investment objectives.  Firms that fail to perform adequate due diligence, or that make unsuitable recommendations, can be held responsible for losses in a FINRA arbitration claim.

If you suffered losses investing in Bonanza Creek energy 6.75% 04/15/21 bonds and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.