JUNE 18, 2003: OSLO, NORWAY - Petroleum Geo-Services ASA ("PGS" or the "Company") (OSE: PGS; OTC: PGOGY) announced today that it has achieved agreement in principle on the terms for a proposed financial restructuring (the "Restructuring") with a majority of both its banks and bondholders and a substantial group of its largest shareholders. The parties to the agreement in principle have signed binding agreements to support the Restructuring on the proposed terms, subject to conclusion of definitive agreements and documentation and the satisfaction of certain specified conditions. A summary of this agreement follows:
BASIS OF THE RESTRUCTURING
The terms of the Restructuring have been designed to:
The proposed Restructuring is based in part on a business plan for the present PGS product lines, which is summarized in Annex A. The Company now manages its businesses to maximize cash flow. This change in focus, together with a comprehensive cost reduction program, have been instrumental in achieving the agreement in principle. The Company's balance sheet and equity position post-restructuring, combined with its current operational performance, will provide a strong basis for its future operations.
Recovery to PGS stakeholders would be maximized in the proposed Restructuring, through a balanced ownership structure representing both present creditors and shareholders. Post-restructuring, PGS's banks and bondholders would own 61% of the Company's shares and holders of the US$144.75 million of PGS Trust I Trust Preferred securities (the "Trust Preferreds") would own 5%. PGS's existing shareholders would own 34% of the Company shares, which includes an acquisition of 30% of the total post-restructuring shares, that would otherwise have been allocated to the banks and bondholders, for US$85 million.
The practical implementation of the proposed Restructuring would most likely be through a court supervised reorganization plan, at the Petroleum Geo-Services ASA (parent company) level, pursuant to Chapter 11 of the U.S. Bankruptcy Code. It is intended that none of the Company's subsidiaries would be involved in a Chapter 11 proceeding, unless necessary in the context of the overall Restructuring. Therefore PGS's day-to-day business with current and future customers, vendors and employees would remain intact and claims from vendors, employees and other subsidiary creditors would be unaffected by the Restructuring as presently contemplated.
The proposed terms have been developed in discussions with PGS's bank lenders and an ad hoc committee of PGS bondholders, representing a combined 54% of PGS's US$2,140 million senior unsecured pari passu creditors. In addition the proposed terms have the support of a Trust Preferred holder, and the trustee for the Trust Preferreds participated in the discussions regarding these terms. The Company has also obtained support for the Restructuring from shareholders representing 20% of PGS's ordinary shares.
The parties to the agreement in principle have signed binding agreements to support the Restructuring on the proposed terms, subject to conclusion of definitive agreements and documentation and the satisfaction of certain specified conditions. The binding agreement signed by the parties provides for any bank debt, bonds or shares sold by the parties to remain subject to the same binding agreement to support the Restructuring. Furthermore, to the extent any of these parties purchase additional bank debt, bonds or shares they have agreed these will also be subject to the binding agreement.
The Company intends for the Restructuring to be completed before year-end 2003, subject to the satisfaction of a number of conditions. The timetable is based on a Chapter 11 filing in July 2003, with subsequent court approval of disclosure materials and creditor and shareholder approvals solicited thereafter. The conditions to consummation of the Restructuring include, among other things, the reaching of a final agreement between PGS, its creditors and shareholders on the detailed terms of the Restructuring, and the approval by these parties of the Restructuring. While PGS is confident that such an agreement will be reached, there can be no guarantee that such a final agreement will be reached or consummated. In addition, the parties have executed a side letter which would release the parties obligations in regards to consummation of the Restructuring under certain defined and limited circumstances.
PGS's US$2,140 million senior unsecured creditors, comprising US$680 million of bank debt and US$1,460 million of bond debt (the "Affected Creditors"), would be entitled to select between two recovery packages in any proportion (subject to limitations on over/under subscriptions discussed below):
Package A
Package B
The Restructuring would include terms to provide for circumstances in which Package A is under or oversubscribed. Oversubscription of Package A would occur if more than US$680 million of Affected Creditors elected for Package A, and undersubscription if less than US$680 million elected for Package A.
If Package A were undersubscribed, the Term Loan would be reduced and the amount of Senior A Notes issued would be increased by up to US$400 million. If Package A were oversubscribed, the Term Loan would be increased by up to US$712.5 million, while the Senior A Notes and Senior B Notes would be reduced by specified amounts.
The new debt issued pursuant to Package A and/or Package B is intended to contain customary covenants to be further negotiated and agreed between the parties. In addition, Affected Creditors would receive, upon completion of the Restructuring, a pro rata share of the cash of the PGS group in excess of US$50 million at the earlier of 31 October 2003 and the time of consummation of the Restructuring. Affected Creditors would also receive a make whole payment to reflect interest forgone if the Restructuring is completed after 31 October 2003, and Package A holders would also receive a percentage of further proceeds in respect to the sale of Atlantis.
Affected Creditors receiving PGS ordinary shares in the Restructuring would give 5% of PGS's post-restructuring shares to the Trust Preferreds, provided that the Trust Preferreds vote in favour of the Restructuring. This will be implemented through a conversion of the claims of the Trust Preferreds into ordinary shares.
Affected Creditors receiving PGS ordinary shares in the Restructuring would give 4% of PGS's post-restructuring shares to existing PGS shareholders, provided that existing shareholders vote in favour of the Restructuring. In addition, and subject to the terms of the underwriting to be provided (as described below), existing PGS shareholders would be offered the right to acquire such number of PGS shares that would increase the ownership of such shareholders from 4% to 34%, of PGS's post-restructuring shares for an aggregate consideration of US$85 million. PGS will not receive any of the US$85 million in proceeds from the existing shareholders acquisition of PGS post-restructuring shares.
The exercise of this right to acquire 30% of the post-restructuring shares from the Affected Creditors would be underwritten by the following significant existing PGS shareholders - Umoe AS (US$60 million), CGG (US$22 million) and TS Industri Invest (US$3 million). These shareholders have agreed to underwrite the entire US$85 million acquisition, subject to the binding agreement signed by the parties. The underwriting shareholders would receive the right to acquire a quarter of the 30% share acquisition in consideration for providing this underwriting. PGS's existing shareholders would therefore have the right to acquire their pro-rata share of the remaining three quarters of the 30% share acquisition.
Creditors of the PGS group other than the Affected Creditors and holders of the Trust Preferreds described above would not be affected by the Restructuring and would therefore retain their existing claims within the restructured entity upon completion of the Restructuring. Unaffected creditors would include PGS trade and subsidiary obligations, PGS Oslo Seismic Services Ltd. 8.28% Secured Mortgage Notes, PGS capital and operating lease and UK defeased lease obligations and PGS Multi Client Services Securitised Preferred Securities.
The composition of the board of PGS will be structured such that the Affected Creditors who select Package B will be entitled to select a simple majority of the board members. Super-majority (66 2/3%) of shareholders would be required to change board composition for two years following completion of the Restructuring. It is intended that Mr. Ulltveit-Moe will be Chairman of the Board.
PGS intends to continue the listing of its ordinary shares on the Oslo Stock Exchange and for its American Depository Shares to continue trading on the U.S. over-the-counter ("OTC") market with a listing in the U.S. as soon as practical after completion of the Restructuring subject to relevant listing requirements. It is intended that PGS new Seniors A and Senior B Notes will be rated by the major credit rating agencies.
PGS would retain US$50 million of cash in the business post-restructuring. In addition, the Company would have the right to establish a US$70 million secured working capital facility.
UBS Limited and ABG Sundal Collier are acting as financial advisers to PGS Group (as defined below).
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