ION Geophysical begins exchange offer, consent bid for 8 1/8% notes

By Angela McDaniels

Tacoma, Wash., March 28 – ION Geophysical Corp. began an exchange offer and consent solicitation for its $175 million of outstanding 8 1/8% senior secured second-priority notes due 2018, according to a company news release.

The holders of more than two-thirds of the outstanding notes have agreed to tender their notes and give their consents.

The company is offering $1,000 principal amount of new 9 1/8% senior secured second-priority notes due 2021 and common stock in exchange for each $1,000 principal amount of 8 1/8% notes.

The number of shares is 10 for each note tendered by 11:59 p.m. ET on April 11, the early tender date, and seven for each note tendered after the early tender date but prior to the end of the offer.

The company is soliciting consents to proposed amendments to the indenture governing the 8 1/8% notes that would, among other things, release all of the second-priority security interest in the collateral securing the notes and grant of a third-priority security interest in the collateral, subordinate to liens securing all senior and second priority debt of the company, including the company's revolving credit facility and the new notes, and eliminate substantially all of the restrictive covenants and some events of default.

No consent fee is being offered.

In addition, the company is providing eligible participants in the exchange offer the option to tender their notes for cash (the "cash tender option"), subject to, among other things, a maximum aggregate amount of cash payable of $15 million plus accrued interest.

The pricing for the cash tender option will be determined through a Dutch auction in which each eligible noteholder electing to participate will specify a price not greater than $600 nor less than $430 per $1,000 principal amount of notes.

The company will accept for purchase notes tendered under the cash tender option beginning with those for which the lowest price has been specified until it has accepted for purchase an aggregate amount of notes equal to the cash tender cap, subject to applicable proration procedures among the last class of bids that still fits under the cash tender cap.

Holders of notes accepted for exchange will also receive accrued interest in cash up to but excluding the settlement date.

In order to participate in the exchange offer, holders must tender all of their notes.

The exchange offer, including the cash tender option, will expire at 11:59 p.m. ET on April 25.

The exchange offer and the consent solicitation are subject to conditions that include, among others, the receipt of tenders for at least 90% of the notes, the receipt of the needed consents and the amendment of the company’s revolving credit facility in connection with the issuance of the new notes.

Only noteholders who are persons in the United States and "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act of 1933, as amended, in the United States and "accredited investors" within the meaning of Rule 501(a) of Regulation D of the Securities Act or not "U.S. persons" and are outside of the United States within the meaning of Regulation S under the Securities Act are eligible for the offer.

The dealer manager is Oppenheimer & Co. Inc. (800 221-5588 or 212 667-8104). The information agent is D.F. King & Co., Inc. (866 620-8437, 212 269-5550 or www.dfking.com/io).

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

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