The energy crash is going to be huge business for Wall Street

Andrew Burton/Getty ImagesThe energy sector has been getting hammered, and that has Wall Street on high alert.The commodity slump has put a number of companies under pressure. Oil and gas companies are edging toward default, and big banks are pulling back from lending to the industry. Restructuring lawyers, activist investors and distressed debt specialists are all gearing up for a flood of new business.We're seeing more restructuring, already, Michael Sage, co-chair of Dechert LLP's business restructuring and reorganization practice, told Business Insider. If you had to pick the biggest factor, it would be the price of oil. Lucrative businessProviding restructuring is big business on Wall Street. Companies often work to restructure their debts, agreeing to new terms with their creditors in the same way a consumer might if they have fallen on hard times.Then there are debt-for-equity swaps, where creditors agree to a reduction in the money owed to them in exchange for a chunk of the company. Some companies split off divisions too, or sell assets to pay back creditors. Thomson ReutersFederal Reserve Board Chair Yellen testifies before House Financial Services Committee in WashingtonMany advisory and law firms that specialize in restructuring work hired staff in expectation of a wave of activity in the aftermath of the financial crisis, but with interest rates at record lows, there has been less activity than many had expected. That looks ready to change. It's likely going to be a steady stream of bankruptcies in 2016 and beyond, Kirkland & Ellis restructuring partner Joshua Sussberg told Business Insider. It's not just because of the decline in commodity prices either. Some energy exploration companies in the sector have been protected from the oil price decline due to hedges on the oil price, according to Sussberg. Many of those bets will expire in 2016, he said.Then there is the prospect of the Federal Reserve raising interest rates, which could put further pressure on energy companies. A lot of companies in that space are already distressed, Ele Klein, partner with Schulte Roth & Zabel, told Business Insider. There's no easy fix for that. Restructuring can includeInvestor interestInvestors are circling the industry, trying to figure out how they might make money.A lot of that capital is now on the sidelines, Sussberg told Business Insider. It's a lot of wait-and-see. Activist investors look ready to move in. For example, 52% of respondents to a recent activist investor survey said the energy sector is filled with significant opportunities, more than any other industry. Energy activism was at a low in 2015 as commodity price issues negatively impacted the industry. It appears that activists are ready and waiting for signs of growth in this sector before beginning to engage, the report said.Then there are companies that will be forced into bankruptcy.DistressWherever there is distress, there are likely to be private equity buyers and distressed debt investors. Distressed debt investors have struggled for returns post-financial crisis, as an extended period of low interest rates has limited the number of companies that have fallen into difficulty. With interest rates set to rise in the near future and bond markets showing signs of stress, some are betting that more companies will find themselves under pressure. Federal Reserve dataThe Federal Reserve tracks non-financial corporate debt, which has risen substantially in the years following the financial crisis.Jay Wintrob, the chief executive of alternatives investor Oaktree Capital, said at the Bank of America 2015 Banking and Financial Services conference in New York that there had been spectacular growth in the amount of debt outstanding since the financial crisis. If and when we see a different part of the credit cycle, my guess is the amount of paper that will be trading at distressed levels will be far higher than the last time at this point in the cycle.It may not be the fall of 2008, the beginning of 2009, it probably won't be, but that doesn't mean that there isn't going to be a lot of really positive investment opportunities out there. NOW WATCH: 'Shark Tank' star Robert Herjavec says only Americans think there are no opportunities in America if (typeof RunFunctions === 'undefined') { var RunFunctions = []; } RunFunctions.push(function() { var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'gwbTkzeDpwglUYEFdCPlUIg1JNcvtfkf',{ autoplay: 'false' }); }); Please enable Javascript to watch this video (function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }());

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The energy crash is going to be huge business for Wall Street

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NOW WATCH: 'Shark Tank' star Robert Herjavec says only Americans think there are no opportunities in America