China Merchants Bank provides a $100 million USD revolving tranche of a $206.25 million USD loan to ION Geophysical Corporation for refinancing, working capital, general corporate purposes (Linked to Record ID#105433 and #105437)

Project narrative

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 — a Delaware-incorporated oil and gas technology company listed on the New York Stock Exchange headquartered in Houston, Texas then 16.6% owned by Chinese state-owned geophysical company BGP, Inc. — 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%. Up to $75 million USD was available for revolving line of credit borrowings were available to ION Geophysical and up to $60.0 million USD or its equivalent in foreign currencies for revolving line of credit borrowings was available to ION International, but the aggregate borrowing could not be $100.0 million USD. 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. ION Exploration Products (U.S.A.) Inc. — a Delaware-incorporated subsidiary of ION Geophysical — and I/O Marine Systems Inc. — a Louisiana-incorporated subsidiary of ION Geophysical — and GX Technology Corporation — a Texas-incorporated subsidiary of ION Geophysical — guaranteed the obligations of ION Geophysical Corporation and ION Exploration Products (U.S.A.) Inc., I/O Marine Systems Inc., GX Technology Corporation, and Concept Systems Limited — a Scotland-incorporated subsidiary of ION Geophysical — and I/O Cayman Ltd. — a Cayman Islands-incorporated subsidiary of ION Geophysical — and ION International Holdings L.P. — a Bermuda-incorporated subsidiary of ION Geophysical — and Sensor Nederland B.V. — a Netherlands-incorporated subsidiary of ION Geophysical — guaranteed the obligations of ION International. BGP Inc. provided a guarantee for the indebtedness under the loan. Then, in June 2010, once applicable governmental approvals were approved, BGP's guarantee was released and INOVA Geophysical Equipment Limited, was incorporated in People's Republic of China and jointly owned by BGP, Inc. (51% stake) and ION Geophysical Corporation (49% stake) assumed the guarantee obligations of BGP. The facility and the guarantee obligations of the U.S. guarantors were secured by (i.e. collateralized against) a first-priority security interest in 100% of the stock of all U.S. guarantors and 65% of the stock of certain first-tier foreign subsidiaries and by substantially all other assets of ION Geophysical Corporation and the U.S. guarantors provided by ION Geophysical Corporation; the obligations of ION International S.à r.l. and foreign guarantors were secured by a first-priority security interest in 100% of the stock of the foreign guarantors and the U.S. guarantors and substantially all other assets of the foreign guarantors, the U.S. guarantors, and ION. The facility featured financial covenants including requirements commencing on June 30, 2011 and for each fiscal quarter thereafter for ION and its U.S. subsidiaries; the covenants required them to maintain a minimum fixed charge coverage ratio in an amount equal to at least 1.125 to 1, to not exceed a maximum leverage ratio of 3.25 to 1, and to maintain a minimum tangible net worth of at least 60% of ION’s tangible net worth as of March 31, 2010. There were also covenants restricting the borrowers, guarantors, and their subsidiaries from incurring additional indebtedness, creating securities, entering into certain transactions and sales of assets, paying cash dividends on its common stock, and repurchasing and acquiring its own capital stock, albeit with exceptions. The facility included customary event of default provisions, with certain acts of bankruptcy, insolvency or liquidation of INOVA Geophysical or BGP would constituting events of default. 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. As of December 31, 2010 and February 18, 2011, the borrowers had no indebtedness outstanding under the revolving line of credit tranche and $103.3 million USD was outstanding under the term loan tranche. As of December 31, 2011, the borrowers had no indebtedness outstanding under the revolving line of credit tranche and $99.3 million USD was outstanding under the term loan tranche. On May 29, 2012, China Merchants Bank entered into the First Amendment to Credit Agreement and Loan Documents agreement with ION Geophysical and ION International; per this amendment, revolving credit borrowings could now be made in U.S. Dollars, Euros, British Pounds Sterling or Canadian Dollars up to $175.0 million USD, with all then-outstanding term loan indebtedness converted to revolving credit indebtedness, such that as of May 29, 2012, there was $98.3 million in total revolving credit indebtedness outstanding under the Credit Facility.