ION Geophysical unsecured creditors committee opposes DIP financing

Chicago, May 6 – ION Geophysical Corp.’s official committee of unsecured creditors objected to the debtors’ emergency motion for interim and final orders for postpetition financing and use of cash collateral, according to an object filed with the U.S. Bankruptcy Court for the Southern District of Texas.

The committee feels that the restructuring transaction is unevenly dictated by the ad hoc group of certain of the debtors’ prepetion secured creditors.

The DIP facility and final order bolster that control of the case.

The committee argues that Gates Capital Management, Inc., the largest creditor in the case, controls the ad hoc group and is controlling the restructuring efforts for most of the last year and has continued to do so since the filings.

The committee thinks that Gates was a driving force behind the April 2021 liability management transactions.

In June 2021, Gates directed the second-lien trustee to appoint two directors to the debtors’ board of directors and subsequently hand-selected the debtors’ chief administrative officer, the objection states.

The committee finds that the restructuring support agreement contemplates a plan where common equity will recover value on account of its interests while unsecured creditors receive a fraction of 1% of their claims, or potentially nothing at all.

The DIP facility, which might not be sufficient to fund the case, would give the ad hoc group additional collateral for a relatively small loan. The additional collateral includes proceeds of all Chapter 5 causes of action, including those against Gates and other members of the ad hoc group.

For a $2.5 million loan, the committee goes on, a collateral and adequate protection package excluding such claims should be more than sufficient.

The committee also thinks that it is being underfunded.

Additionally, the June 17 deadline for the final order is too soon for the committee to do everything it needs to do, including complete its investigation and seek and obtain standing within two weeks of the hearing to approve the final order.

The committee says the final order needs to be clearer about releases. It also should extend the challenge period through the later of June 17 or the plan objection deadline. The committee says that prepetition secured parties’ right to credit bid must be subject to the challenge provisions. The final order should make clear that carve-out reserves must be funded in their entirety as a condition to closing of any sale transaction. Notices of any amendments to the DIP facility should be given to the committee, with notices about any proposed disposition of DIP collateral. The committee should also receive any reporting the ad hoc group receives.

The committee asks the court to deny the debtors’ motion or condition entry of the final order to reflect the modifications noted.

ION Geophysical is a Houston-based provider of geophysical technology, services and solutions for the oil and gas industry. The company filed Chapter 11 bankruptcy on April 12 under case number 22-30987.

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