Bank of China provides a $40 million USD revolving bridge loan via a $140 million USD syndicated loan to ION Geophysical Corporation for general corporate purposes (Linked to Record ID#105436 and #105437)

Project narrative

On October 23, 2009, a syndicate of lenders — including HSBC Bank USA — entered into the Sixth Amendment to the Amended and Restated Credit Agreement originally dated July 3, 2018 with ION Geophysical Corporation — a Delaware-incorporated oil and gas technology company listed on the New York Stock Exchange headquartered in Houston, Texas — and ION International S.à r.l. — a Luxembourg-incorporated indirect wholly-owned subsidiary of ION Geophysical Corporation — in which the New York Branch of the Bank of China (BOC) joined the $100.0 million USD revolving credit facility (RCF) agreement with a revolving commitment of $40.0 million USD — increasing the face value to $140.0 million USD for the loan for working capital purposes — and modified the loan's waivers to allow for a warrant issuance agreement with BGP Inc. — a Chinese state-owned geophysical company — to purchase shares of ION's common stock for $2.80 USD per share (14,285,714 shares) that may be exercised in lieu of conversion of the convertible notes and to allow for two promissory notes were issued to BOC by ION Geophysical Corporation and ION International S.à r.l under the credit facility for a principal amount of $40.0 million USD to convertible into shares of ION's common stock for $2.80 per share (14,285,714 shares). BOC's $40 million USD commitment and the convertible notes carried a final maturity date of July 3, 2013 (approximately 3.696 years). The note issued by ION Geophysical to BOC was secured by its assets and those of its domestic subsidiaries and the note issued by ION International to BOC was secured by assets owned by it, ION Geophysical, and other subsidiaries of ION. The bridge loan itself, like the rest of the credit facility, was senior debt and secured (i.e. collateralized). The amendment included waivers of the financial covenants contained in the credit facility for the fiscal quarters ending September 30, 2009, December 31, 2009, March 31, 2010 and June 30, 2010, allowing it to operate until the transactions with BGP was completed, which was planned for March 2010; without the waivers, the borrowers would not have been in compliance with its financial covenants at September 30, 2009 or December 31, 2009. On October 27, 2009, ION Geophysical Corporation drew down $40 million USD from BOC's revolving bridge loan commitment for its general corporate purposes. Under the convertible promissory notes, ION Geophysical borrowed $30 million USD and ION International borrowed $10 million USD. The $10 million USD advanced to ION International under the bridge loan and was repaid the following day. On March 25, 2010, ION Geophysical issued to BGP 23,789,536 shares of ION’s common stock at an effective purchase price of $2.80 USD per share, consisting of 10,204,082 shares acquired upon BGP’s conversion of the approximately $28.6 million USD principal balance of indebtedness outstanding under a convertible promissory note dated October 23, 2009 issued by ION Geophysical to BOC and (13,585,454 shares BGP purchased for $2.80 USD cash per share under a stock purchase agreement, resulting in total gross cash proceeds to ION of approximately $38.0 million USD. On March 19, 2010, BOC assigned its convertible notes to BGP, and on March 24, 2010, BGP delivered a notice to ION of its election to convert the entire outstanding principal amount under the domestic convertible note into 10,204,082 shares of ION’s common stock at the $2.80 USD per share, simultaneously with and conditioned upon the closing of the transactions under the stock purchase agreement. BGP did not convert any of the outstanding amount under the foreign convertible note. The total outstanding indebtedness owed by ION Geophysical under the foreign convertible note and all unpaid interest and fees on the domestic convertible note were repaid by ION, along with the other revolving credit loans under ION's existing bank credit facility — including the $40 million USD BOC loan — using amounts borrowed under the China Merchants Bank facility and the $38.0 million USD proceeds from the sale of 13,585,454 shares of ION common stock to BGP. BGP terminated its warrant and ultimately, as of March 25, 2010, owned approximately 16.6% of the outstanding shares of ION Geophysical common stock. On March 25, 2010, the New York Branch of China Merchants Bank, Co., Ltd. — as administrative agent and lender — entered into $206,250,000 USD senior secured credit facility agreement with ION Geophysical Corporation and ION International S.à r.l. — a Luxembourg-incorporated indirect wholly-owned subsidiary of ION Geophysical Corporation — for refinancing, working capital, general corporate purposes. This facility was divided into two tranches: a $100,000,000 USD revolving line of credit tranche and a $106,250,000 USD term loan tranche. The facility also included a $35.0 million USD sub-limit for the issuance of documentary and stand-by letters of credit. This loan carried a maturity period of five years and a final maturity date of March 24, 2015; the $106.3 million USD term loan carried a repayment schedule with scheduled quarterly amortization payments of $1.0 million USD per quarter until the maturity date, with the remaining unpaid principal amount of the term loan due upon the maturity date. This loan carried an interest rate at the option of the borrowers, being either the greatest of the prime rate of China Merchants Bank or a federal funds effective rate plus 0.50%, or an adjusted LIBOR-based rate plus 1.0% and an applicable interest margin of 2.5%; for eurodollar borrowings and borrowings in Euros, Pounds Sterling or Canadian Dollars, the interest rate would be the sum of an adjusted LIBOR-based rate and an applicable interest margin of 3.5%. The proceeds were to be used by the borrowers to refinance and replace its existing Term A debt, namely a syndicated credit facility under an Amended and Restated Credit Agreement dated July 3, 2008 and amended thereafter, including an October 2009 amendment that Bank of China (BOC) provided a $40 million USD bridge loan to (Record ID#105433), for working capital needs, to finance acquisitions and investments, and for general corporate purposes; specifically, the $106.3 million USD term loan tranche refinanced the outstanding term loan debt. Record ID#105436 captures the $100 million USD revolving line of credit tranche. Record ID#105437 captures the $106.25 million USD term loan tranche. Concurrent with the amendment signing, ION Geophysical entered into a binding term sheet with BGP Inc. for a proposed land equipment joint venture between BGP and ION Geophysical. Prior to the completion of the joint venture and the injection of the cash at it, BGP and ION were both concerned that ION would fail to meet its obligations in the time between the announcement of the term sheet and the close of the transaction, so in September 2010, ION and BGP began to explore bridge financing for ION. After considering several options, BGP decided to partner with BOC and provide for a bridge loan through ION's existing credit facility. While BOC was not regularly providing financing to small public companies in the United States, as a state-owned bank, it acted as a strategic financial farm of the Chinese Government facilitating the investment of another state-owned enterprise into a potentially precedent-setting joint venture with an American company; the loan was not for business or commercial purposes on their own but the strategic important of it to BGP, its parent China National Petroleum Corporation, and the Chinese Government. ION proposed a $20 million USD loan, BGP proposed a $65 million USD loan. BGP and BOC initially proposed an amendment of the existing credit facility of ION Geophysical to include a separate tranche, but this was abandoned because HSBC, the arranger of the credit facility, did not believe it would receive unanimous approval for a separate tranche with a shorter commitment period and maturity date, so instead BOC pursued to enter the credit facility on equal terms with existing lenders at $40 million USD, the maximum amount allowed under the loan's accordion feature. The promissory notes from ION Geophysical and ION Geophyiscal issued to BOC were designed so that BGP could purchase BOC's rights and then convert into common stock, eliminating the need to pay cash at closing, with the warrant ensuring that BGP could recapture cash it put into the bridge loan. The bridge loan also had the benefit of being senior secured debt, that, if the BGP joint venture deal collapsed, BOC and BGP would have the best chance to secure repayment. On November 25, 2009, Fletcher International, Ltd., which held ION Geophysical Corporation's outstanding Series D Preferred Stock, filed a lawsuit against the ION Geophysical and certain of its directors in the Delaware Court of Chancery, alleging that ION violated Fletcher’s consent rights contained in the Series D Preferred Stock Certificates of Designation, by ION S.à r.l.’s issuance of a convertible promissory note to BOC in connection with the bridge loan and that the directors violated their fiduciary duty to ION Geophysical by allowing ION S.à r.l. to issue the convertible note without Fletcher’s consent. Fletcher sought a court order to require ION S.à r.l. to repay the $10 million USD advanced to it under the bridge loan and for unspecified monetary damages. On March 24, 2010, the presiding judge in the case denied Fletcher’s request for the court order. In a Memorandum Opinion issued on May 28, 2010 in response to a motion for partial summary judgment, the judge dismissed all of Fletcher’s claims against the named directors but concluded that, because the bridge loan note issued by ION S.à r.l. was convertible into ION common stock, Fletcher technically had the right to consent to the issuance of the note and that ION Geophysical violated that consent right by ION S.à r.l. issuing the note without Fletcher’s consent. In December 2010, the presiding judge recused himself and a new presiding judge was appointed. In March 2011, the judge dismissed certain claims asserted by Fletcher. Ultimately, in December 4, 2013, the court awarded a monetary damage award of $300,000 USD to Fletcher.