ION Geophysical committee calls for plan releases to be limited

By Sarah Lizee

Olympia, Wash., July 26 – ION Geophysical Corp.’s Chapter 11 plan drew an objection from the official committee of unsecured creditors on Monday, according to court documents with the U.S. Bankruptcy Court for the Southern District of Texas.

The committee said that it had engaged in extensive negotiations with the debtors and the secured lenders in an effort to ensure a meaningful recovery to unsecured creditors, something that was absent from the original plan.

The secured lenders agreed to waive about $87 million in deficiency claims; carve out from their collateral $1.55 million in cash, less committee professional fees in excess of the debtor-in-possession budget and the unsecured notes trustee’s fees and expenses in excess of $75,000; and carve out from their collateral 4% of all collateral proceeds through the sale of the debtors’ assets.

The committee said these contributions are worth over $3 million and will benefit the debtors’ estates and unsecured creditors.

In exchange for the contributions, the secured lenders required the committee to support plan releases for directors and officers affiliated with or appointed by the secured lenders. The committee agreed to this requirement.

The committee said the debtors incorporated all of the terms negotiated between the secured lenders and the committee, with one exception: they refuse to allow the estates to retain claims against the non-lender appointed directors and officers.

“Instead, the plan provides blanket releases for not only those officers and directors on whose behalf over $3 million of value is being provided to the debtors’ estates, but also for those directors and officers who are contributing nothing,” the committee said.

“This violates well-settled Fifth Circuit law by providing valuable releases in exchange for nothing. It also has the effect of releasing $30 million in director and officer insurance coverage that is one of the estates’ most valuable unencumbered assets.”

The plan confirmation is hearing for July 28.

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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