Geokinetics wins OK for disclosure statement; pre-pack plan confirmed

By Jim Witters

Wilmington, Del., April 25 - Geokinetics Inc. won approval of its disclosure statement and confirmation of its pre-packaged Chapter 11 plan of reorganization during an April 25 hearing in the U.S. Bankruptcy Court for the District of Delaware.

After last-minute scurrying to nail down wording changes to satisfy objections from the Internal Revenue Service, the U.S. Trustee's Office and several Texas government entities, the debtors attorneys presented Judge Kevin J. Carey a fully consensual plan.

Debtors attorney Sarah Link Schultz said the cash on hand, coupled with the exit financing facility, provides the debtors with sufficient liquidity to pay all allowed claims, administrative fees and expenses and the undisputed portion of a claim from Whitebox Advisors LLC.

The disputed portion of the Whitebox claim is headed for mediation. The debtors are establishing a reserve to cover any additional settlement stemming from that claim.

The plan of reorganization is intended to complete a financial restructuring and ensure the continued operation of the company, which supplies seismic data to the oil and gas industry.

The company began experiencing liquidity issues and operating losses early in 2011, primarily due to delays in project commencements, low asset utilization, idle crew costs and the effects of a Mexico liftboat incident in which three crew members died.

Beginning in 2011, management closed regional offices, sold non-core assets and ended operations in which the long-term profitability prospects were not in line with Geokinetics' business goals, according to court filings.

On Jan. 15, the debtors entered into a plan support agreement with consenting noteholders and the consenting preferred equity holder.

Plan details

The pre-packaged plan provides for

• The payment in full of the company's $50 million of loans from the proceeds of an exit facility;

• A cash payment to senior preferred equity holders from the debtors, the consenting noteholders and the consenting preferred equity holder; All preferred stock will be canceled;

• The conversion of the $300 million (plus accrued interest) of the company's senior secured notes into newly issued common equity of the reorganized company. The equity - valued at $224 million - will represent 100% of the reorganized company's issued and outstanding common stock after the issuance; and

• The payment of allowed general unsecured claims in full either at the conclusion of the Chapter 11 case or in the ordinary course of business.

The reorganized company will carry $60 million to $75 million of secured debt and about $114 million of unsecured liabilities, according to court documents.

Geokinetics, based in Houston, is a provider of seismic data acquisition, seismic data processing services and multi-client seismic data to the oil and gas industry. The company filed for bankruptcy on March 10. Its Chapter 11 case number is 13-10472.

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