OREANDA-NEWS. Fitch Ratings has published its quarterly leveraged market synopsis, 'U.S. Leveraged Market Quarterly.' The report reviews first quarter 2015 activity. The energy sector is highlighted in this quarters' publication.

SECTOR SPOTLIGHT: OIL AND GAS
The oversupply in the crude oil market has led WTI prices to fall more than 50% since June to approximately \$50/bbl. Fitch expects this oversupply to gradually correct as industry capex cuts (averaging 30%-35% in North America) begin to scale back supply, although it will take time for these cuts to work their way through the energy chain. At approximately 450 million barrels, U.S. crude inventories are now at their highest levels in 80 years.

Although the overall effect of the price collapse on E&Ps was minimal on 2014 results, Fitch expects it will be pronounced in 2015. Fitch anticipates that issuers across the ratings spectrum will see significant deterioration in debt/EBITDA leverage and interest coverage in 2015 before modest improvements begin, in line with Fitch's expectations for gradually rising oil prices.

Liquidity remains a top issue for high yield companies. Borrowing base redeterminations for secured revolvers are especially important in this regard. These redeterminations typically occur twice per year (in the spring and the fall), but allow for considerable lender discretion. While Fitch is expecting borrowing bases to be lowered in line with weaker prices, Fitch believes that lenders' willingness to cut off the efficient flow of credit to borrowers, particularly for producers with strong asset quality and operational track records, may be limited based on history.

REITization TREND
Several C-Corps have elected REIT status in nontraditional real estate asset classes in the past several years. The REITization trend is largely being driven by the search for alternative tax treatments and favorable real estate valuations. Although the agency views electing REIT status as a credit negative due to the consistent need for access to capital markets, Fitch anticipates that the recent volume of REIT conversions will continue and enable specialty real estate operators to lessen their tax burden.

The full report 'U.S. Leveraged Market Quarterly' is available on Fitch's website at www.fitchratings.com.