GGS files for Chapter 11 protection
May 2014 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
US seismic data provider Global Geophysical Services Inc (GGS), which services some of the country’s biggest oil and gas companies, filed for Chapter 11 bankruptcy protection on 25 March. The firm cites increasing competition in the US market for its recent financial difficulties, as well as a significant amount of debt.
The company now intends to focus its attention on dramatically reducing its debt pile and the nascent overseas markets. In its court paperwork, GGS noted that, in the international markets, spending on seismic data by the oil and gas industry is expected to grow between 7 and 9 percent going forward – compared with less than half that in the US. As a response to this increased demand the company has already transferred a portion of its operational and administrative functions to locations in Brazil and Dubai. GGS, in a statement announcing the bankruptcy filing, noted that although the filing would impact a number of its units including Autoseis Inc, the company’s non-US subsidiaries would not be included. As such, those units will not be subject to the requirements of the US Bankruptcy Code. GGS and its various subsidiaries operate in a number of different countries including Alaska, Colombia, Brazil, Iraq, Kenya and Dubai.
Houston based GGS, which employs around 8000 globally, has already agreed a potential debtor-in-possession (DIP) financing agreement that would give it a debt facility of up to $60m. This DIP financing will allow the company to maintain its usual operations throughout the restructuring process. The company has sought court authorisation to continue to pay employee wages, as well as provide health care and other benefits to its staff. GGS has also asked the US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, for authority to continue to support its international operations during the bankruptcy process. GGS hopes to pay its suppliers in full under normal terms for all goods and services provided after the filing date. According to GGS, the company also has a ‘strong backlog’ of orders in place to help sustain it during the process. The firm’s court documentation shows an order book worth in the region of $180m, as of 28 February.
GGS listed assets and debts of around $469m each in its court documentation, and has noted it is considering a number of options as it attempts to restructure and reduce its debt pile. The company has not ruled out divesting assets or seeking a merger with another company. In March, GGS reported an expected loss from operations of $101.9m on revenues of $292.5m for 2013.
In a statement announcing the bankruptcy filing, Richard White, GGS’ chief executive, noted that “While Global made significant headway on a number of initiatives aimed at improving operational efficiency in 2013, the Company continued to be burdened by significant debt incurred over the past several years. Since 17 March, with the assistance of our financial advisors, we have been engaged in discussions with our lenders and bondholders to begin exploring methods to improve our liquidity, including any necessary restructuring that will permit us to continue our operations and attempt to preserve the value of our assets and overall enterprise.”
Mr White went on to say that the ultimate goal of the restructuring is to see the company emerge with a vastly improved balance sheet and with enhanced financial flexibility. GGS currently owes $81.7m on its senior secured loan from TPG Specialty Lending Inc. and Tennenbaum Capital Partners LLC. The company also has approximately $250m in publicly traded unsecured bond debt, all of which is 10.5 percent senior notes which are due in 2017 and issued in 2010 and 2012 with the Bank of New York Mellon Corp listed as trustee. GGS also owes on insurance financing, capital leases, a letter of credit facility and more than $6m in notes issued by banks in Colombia.
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