ION Geophysical finalizes refinancing of debt used to acquire ARAM, nixes $175 million notes offering

By Angela McDaniels

Tacoma, Wash., Dec. 30 - ION Geophysical Corp. has agreed to refinance the debt it incurred for its September acquisition of ARAM Systems Ltd. and Canadian Seismic Rentals Inc., according to a company news release.

"We originally borrowed a total of approximately $158.0 million in short-term bridge debt to acquire ARAM. Our original intention was to repay those amounts through the offering of $175.0 million of senior notes before the end of the year," executive vice president and chief financial officer Brian Hanson said in the release.

"However, in light of the current difficult conditions in the credit markets, we decided not to proceed with the offering and redirected our efforts to other financing vehicles to allow us to reduce the overall amount of indebtedness involved in the refinancing, mitigate our interest expense and protect shareholder value."

A portion of the purchase price was funded with $72 million of revolving credit borrowings due Dec. 31, 2008, proceeds from a $41 million bridge loan due Dec. 31, 2008 and two short-term promissory notes due September 2009 totaling $45 million, which were issued to one of the sellers of ARAM.

The company said it repaid the $72 million revolving credit borrowing with funds from internally generated cash flows. In addition:

• The $41 million bridge loan will be replaced with a loan maturing on Jan. 31, 2010 and carrying an effective interest rate of 25%;

• The maturity of the $35 million promissory note will be extended to September 2013, with an interest rate of 15%; and

• The $10 million promissory note will be cancelled in exchange for the company's assignment to the ARAM seller of an income tax receivable related to ARAM pre-acquisition operations in roughly the same amount.

The company has also received two proposals to enter into a five-year sale-leaseback finance transaction involving some rental assets. If consummated, the transaction should result in proceeds of about $40 million, the release stated.

The company recently filed a universal shelf registration statement with the Securities and Exchange Commission that allows it to issue debt and equity securities, Hanson said, adding that the company sought to ensure financing flexibility and has no current plans to issue any securities.

ION is a Houston-based provider of geophysical technology, services and solutions for the oil and gas industry.

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