Distress in North Sea oil and gas assets: tax traps for the unwary

Many highly leveraged oil and gas companies have suffered from the persistently low oil prices of the last few years leading to the price of their debt dropping to distressed levels. This has opened up opportunities for investment funds and other non-bank lenders to purchase debt at discount prices with the possibility of debt prices significantly increasing as oil prices rise or the issuer otherwise improves its creditworthiness. If the company’s financial situation has got to the point that a financial restructuring is required as part of which creditors may swap a portion of their debt for an equity stake there is also the added allure of the valuable tax losses that these companies will almost inevitably have on their balance sheets. However...