Global Geophysical Services back in bankruptcy

October 2016 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

A little more than 12 months after emerging from Chapter 11 bankruptcy protection for the first time, Global Geophysical Services (GGS), a company that provides seismic data to the oil & gas industry, has once again filed for bankruptcy protection.

Privately held GGS, and six of its subsidiaries, filed for Chapter 11 protection with the US Bankruptcy Court in the Southern District of Texas in August, citing persistently low oil prices as the reason for the company’s failure. GGS, in its court submission, listed assets and liabilities of between $100m and $500m. The company is also requesting permission from the court to access up to $2m in debtor in possession financing.

According to the pre-packaged Chapter 11 plan that the company submitted, if it wins approval, GGS will split its business in two. One of the two parts, a new reorganised company owned by GGS’s first lien debt holders, would keep control of the businesses’ core assets including the data library and real estate properties. The company’s remaining assets would be controlled by the second company and liquidated.

GGS’ first-lien debt holders are owed $85m, according to the company’s court filings. GGS’ chief executive, Sean Gore, said in a declaration filed with the bankruptcy court that the proposed Chapter 11 plan would result in recoveries for the company’s more junior lenders and unsecured creditors.

“As currently organised, the debtors do not have a business plan that can withstand the trough in commodity prices and the associated decline in capital expenditures in the exploration market,” said Mr Gore.

GGS, based in Missouri City, Texas, had previously filed for Chapter 11 protection in March 2014, listing assets and debt of about $469m each. The company emerged from bankruptcy protection in February last year, a moment which Richard White, the company’s global chief executive, heralded as “the start of a new chapter for our company”.

GGS initially filed for Chapter 11 protection following the announcement that the company was required to restate its financial reports for periods going back to 2009. This restatement of the reports was initially responsible for plunging the company into default on funded debt of more than $300m, further squeezing the liquidity of a company that was already experiencing financial difficulties.

GGS emerged from its first spell in Chapter 11 protection having reduced $250m from its debt pile. However, the company has endured considerable financial difficulties over the last year, much like rest of the oil & gas sector, with the last two years punctuated by Chapter 11 filings.

Given the hard times it endured, the only option available to GGS was re-filing for bankruptcy protection. “The decline in energy commodity prices greatly hindered the (GGS’) ability to confirm a plan and emerge from the 2014 cases,” confirmed Mr Gore.

Indeed, for Mr Gore and his colleagues there is seemingly no prospect of reversing the company’s fortunes. Under the terms of the company’s pre-packaged plan, senior lenders are expected to recover about 76 cents on the dollar. By contrast, the company’s junior lenders, owed about $40m, and the firm’s general unsecured creditors, will recover around seven cents on the dollar. The proceeds from the liquidation of the split company’s assets would be used to pay unsecured creditors.

GGS’s biggest shareholder is Third Avenue’s troubled junk bond fund, Third Avenue Focused Credit Fund, which holds a 38.6 percent stake. Other big shareholders include Candlewood Investment Group, which owns 17.7 percent of the company, and Litespeed Management, which holds a 15.5 percent holding.

Richard Summerfield