Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on December 16, 2021, ION Geophysical Corporation (the “Company” or “ION”) elected to miss the December 15, 2021 due date to pay the outstanding principal and interest on its 9.125% Notes (the “2021 Notes”), and the interest payment on its 8.00% Senior Secured Second Priority Notes due in 2025 (the “2025 Notes”). Missing payment on the 2021 Notes did not result in any cross default on the Company’s outstanding indebtedness or its credit facility. Under the 2025 Notes, the Company had a 30-day grace period to cure missed interest payments.
On January 14, 2022, the Company and PNC Bank, National Association (“PNC”), entered into a Forbearance and Fifth Amendment to the Revolving Credit and Security Agreement dated August 22, 2014 (as amended, the “Credit Agreement”), pursuant to which PNC agreed (i) to waive, through and including February 15, 2022, a cross default that would have occurred under the Credit Agreement and (ii) to other changes to the terms of the Credit Agreement. Also on that date, the Company entered into a Forbearance Agreement (the “2025 Notes Forbearance Agreement”) with holders of more than 79% of its 2025 Notes to forbear until February 15, 2022 from enforcing, or taking any action to direct the 2025 Notes indenture trustee to enforce, their rights and remedies arising as a result of the missed interest payment.
PNC Second Forbearance and Sixth Amendment to Credit Agreement
On February 15, 2022, the Company issued a press release announcing that ION and PNC entered into a Second Forbearance and Sixth Amendment (the “PNC Forbearance Agreement”) to the Credit Agreement. A copy of that press release is attached hereto as Exhibit 99.1. By the PNC Forbearance Agreement, PNC has agreed to waive, through and including March 8, 2022, a cross default that would have occurred under the Credit Agreement by virtue of ION’s missing, and still not having paid, the interest payment on the 2025 Notes that was due on December 15, 2021. In addition, ION and PNC agreed, among other things, that ION would pay down the outstanding balance under the Credit Agreement by $1.25 million, to reduce the total commitment thereunder to $15.6 million, and that the cash dominion and covenant testing trigger would be set at below $3.75 million US non-restricted cash for five consecutive business days.
The foregoing description of the PNC Forbearance Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the complete text of the PNC Forbearance Agreement, a copy of which is being filed as Exhibit 10.1 hereto and is incorporated herein by reference.
2025 Notes Forbearance Amendment
In the same press release, ION announced that it had entered into Amendment No. 1 to the Forbearance Agreement (the “2025 Notes Forbearance Agreement Amendment”) with holders of more than 79% of its 2025 Notes. By the 2025 Notes Forbearance Agreement Amendment, the joining noteholders agree to forbear (subject to certain early termination events) until March 8, 2022 from enforcing, or taking any action to direct the 2025 Notes indenture trustee to enforce, their rights and remedies arising as a result of ION’s failure to make the December 15, 2021 interest payment due on the 2025 Notes.
The foregoing description of the 2025 Notes Forbearance Agreement Amendment does not purport to be complete and is subject to and qualified in its entirety by reference to the complete text of the 2025 Notes Forbearance Agreement Amendment, a copy of which is being filed as Exhibit 10.2 hereto and is incorporated herein by reference.
ION remains in continuing discussions with PNC and the holders of its 2025 Notes and other indebtedness regarding various strategic alternatives to strengthen its financial position and maximize stakeholder value. These strategic alternatives include, among others, a sale or business combination transaction or sales of assets, any of which may be executed as part of an in-court or out-of-court restructuring process.
