Long-term Debt

The following table is a summary of long-term debt obligations, net (in thousands):



Obligations (in thousands)	March 31, 2018			December 31, 2017
Senior secured second-priority lien notes (maturing December 15, 2021)	$	120,569		$	120,569
Senior secured third-priority lien notes (redeemed on March 26, 2018)	—			28,497
Revolving line of credit (maturing August 22, 2019)	—			10,000
Equipment capital leases and other debt	1,014			1,661
Costs associated with issuances of debt	(3,653		)	(3,983		)
Total	117,930			156,744
Current portion of long-term debt and lease obligations	(1,014		)	(40,024		)
Non-current portion of long-term debt and lease obligations	$	116,916		$	116,720

Revolving Credit Facility

In August 2014, ION Geophysical Corporation and its material U.S. subsidiaries, GX Technology Corporation, ION Exploration Products (U.S.A.), Inc., and I/O Marine Systems, Inc. (collectively, the “Subsidiary Borrowers”; ION Geophysical Corporation and the Subsidiary Borrowers are, collectively, the “Borrowers”) entered into a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”), as agent (the “Original Credit Agreement”). The Original Credit Agreement was amended by the First Amendment to Revolving Credit and Security Agreement in August 2015 (the “First Amendment”) and the Second Amendment (as defined below) (the Original Credit Agreement, as amended by the First Amendment, and the Second Amendment, is herein called the “Credit Facility”).

The Credit Facility is available to provide for the Borrowers’ general corporate needs, including working capital requirements, capital expenditures, surety deposits and acquisition financing. The maximum amount of the revolving line of credit under the Credit Facility is the lesser of $40.0 million or a monthly borrowing base.

In April 2016, the Borrowers and PNC entered into a second amendment (the “Second Amendment”) to the Credit Facility. The Second Amendment, among other things:


•	increased the applicable margin for loans by 0.50% per annum (from 2.50% per annum to 3.00% per annum for alternate base rate loans and from 3.50% per annum to 4.00% per annum for LIBOR-based loans);


•	increased the minimum excess availability threshold to avoid triggering the agent’s rights to exercise dominion over cash and deposit accounts and increases certain of the thresholds upon which such dominion ceases;


•	increased the minimum liquidity threshold to avoid triggering ION Geophysical Corporation’s obligation to calculate and comply with the existing fixed charge coverage ratio and increased certain of the thresholds upon which such required calculation and compliance cease;


•	established a reserve that was to reduce the amount available to be borrowed by the aggregate amount owing under all Third Lien Notes that remained outstanding (if any) on or after February 14, 2018 (i.e., 90 days prior to the stated maturity of the Third Lien Notes);


•	increased the maximum amount of certain permitted junior indebtedness to $200.0 million (from $175.0 million);


•	incorporated technical and conforming changes to reflect that the Second Lien Notes and the remaining Third Lien Notes (and any permitted refinancing thereof or subsequently incurred replacement indebtedness meeting certain requirements) constitute permitted indebtedness;


•	clarified the circumstances and mechanics under which ION Geophysical Corporation may prepay, repurchase or redeem the Second Lien Notes, the remaining Third Lien Notes and certain other junior indebtedness;


•	modified the cross-default provisions to incorporate defaults under the Second Lien Notes, the remaining Third Lien Notes and certain other junior indebtedness; and


•	eliminated the potential early commitment termination date and early maturity date that would otherwise have occurred ninety (90) days prior to the maturity date of the Third Lien Notes if any of the Third Lien Notes then remained outstanding.

The borrowing base under the Credit Facility will increase or decrease monthly using a formula based on certain eligible receivables, eligible inventory and other amounts, including a percentage of the net orderly liquidation value of the Borrowers’ multi-client library (not to exceed $15.0 million for the multi-client data library data component). As of March 31, 2018, the borrowing base under the Credit Facility was $23.6 million, and there was no indebtedness under the Credit Facility. Even though the Company experienced an increase in its accounts and unbilled receivables from one year ago, those increases were part of the Company’s foreign operations which are not included in the borrowing base calculation. The Credit Facility is scheduled to mature on August 22, 2019.

The obligations of Borrowers under the Credit Facility are secured by a first-priority security interest in 100% of the stock of the Subsidiary Borrowers and 65% of the equity interest in ION International Holdings L.P. and by substantially all other assets of the Borrowers.

The Credit Facility contains covenants that, among other things, limit or prohibit the Borrowers, subject to certain exceptions and qualifications, from incurring additional indebtedness (including capital lease obligations), repurchasing equity, paying dividends or distributions, granting or incurring additional liens on the Borrowers’ properties, pledging shares of the Borrowers’ subsidiaries, entering into certain merger transactions, entering into transactions with the Company’s affiliates, making certain sales or other dispositions of the Borrowers’ assets, making certain investments, acquiring other businesses and entering into sale-leaseback transactions with respect to the Borrowers’ property.

The Credit Facility requires that the Borrowers maintain a minimum fixed charge coverage ratio of 1.1 to 1.0 as of the end of each fiscal quarter during the existence of a covenant testing trigger event. The fixed charge coverage ratio is defined as the ratio of (i) ION Geophysical Corporation’s EBITDA, minus unfunded capital expenditures made during the relevant period, minus distributions (including tax distributions) and dividends made during the relevant period, minus cash taxes paid during the relevant period, to (ii) certain debt payments made during the relevant period. A covenant testing trigger event occurs upon (a) the occurrence and continuance of an event of default under the Credit Facility or (b) the failure to maintain a measure of liquidity greater than (i) $7.5 million for five consecutive business days or (ii) $6.5 million on any given business day. Liquidity, as defined in the Credit Facility, is ION Geophysical Corporation’s excess availability to borrow ($23.6 million at March 31, 2018) plus the aggregate amount of unrestricted cash held by the Borrowers and their domestic subsidiaries. At March 31, 2018, the Borrowers and their domestic subsidiaries had unrestricted cash totaling $41.4 million and non-domestic subsidiaries had unrestricted cash totaling $9.4 million.

At March 31, 2018, ION Geophysical Corporation was in compliance with all of the covenants under the Credit Facility.

The Credit Facility contains customary event of default provisions (including a “change of control” event affecting ION Geophysical Corporation), the occurrence of which could lead to an acceleration of ION Geophysical Corporation’s obligations under the Credit Facility.

Senior Secured Notes

As of December 31, 2017, ION Geophysical Corporation’s 9.125% Senior Secured Second Priority Notes due December 2021 (the “Second Lien Notes”) had an outstanding aggregate principal amount of $120.6 million, and ION Geophysical Corporation’s 8.125% Senior Third Priority Notes due May 2018 (the “Third Lien Notes”) had an outstanding aggregate principal amount of $28.5 million (The Third Lien Notes and the Second Lien Notes, are herein, collectively the “Notes”). In March 2018, ION Geophysical Corporation obtained consent from a majority of the Second Lien Notes holders and from PNC to redeem, in full, the Third Lien Notes prior to their stated maturity. On March 26, 2018, ION Geophysical Corporation redeemed the Third Lien Notes by paying the then outstanding principal amount of $28.5 million, plus all accrued and unpaid interest through the redemption date. For additional discussion, see Footnote 14. For a complete discussion of the Third Lien Notes prior to their early redemption, see Footnote 3 to the Financial Statements included in the Company’s Annual Report on Form 10-K, as amended for the year ended December 31, 2017.

The Second Lien Notes remain outstanding and are senior secured second-priority obligations guaranteed by ION Geophysical Corporation’s material U.S. subsidiaries, GX Technology Corporation, ION Exploration Products (U.S.A.), Inc. and I/O Marine Systems, Inc. (the “Guarantors”). The Second Lien Notes mature on December 15, 2021. Interest on the Second Lien Notes accrues at the rate of 9.125% per annum and is payable semiannually in arrears on June 15 and December 15 of each year during their term, except that the interest payment otherwise payable on June 15, 2021 will be payable on December 15, 2021.

The April 2016 indenture, governing the Second Lien Notes (the “Second Lien Notes Indenture”) contains certain covenants that, among other things, limits or prohibits ION Geophysical Corporation’s ability and the ability of its restricted subsidiaries to take certain actions or permit certain conditions to exist during the term of the Second Lien Notes, including among other things, incurring additional indebtedness, creating liens, paying dividends and making other distributions in respect of ION Geophysical Corporation’s capital stock, redeeming ION Geophysical Corporation’s capital stock, making investments or certain other restricted payments, selling certain kinds of assets, entering into transactions with affiliates, and effecting mergers or consolidations. These and other restrictive covenants contained in the Second Lien Notes Indenture are subject to certain exceptions and qualifications. All of ION Geophysical Corporation’s subsidiaries are currently restricted subsidiaries.

As of March 31, 2018, ION Geophysical Corporation was in compliance with the covenants with respect to the Second Lien Notes.

On or after December 15, 2019, the Company may on one or more occasions redeem all or a part of the Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest and special interest, if any, on the Second Lien Notes redeemed during the twelve-month period beginning on December 15th of the years indicated below:



Date		Percentage
2019		105.500%
2020		103.500%
2021 and thereafter		100.000%