Annual Report 2011 - PGS

Notes to the consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
annum payable semi-annually in arrears. The equity element of the convertible notes was calculated to 17.1% of the nominal
value ($68.4 million) and was recorded to shareholders’ equity, net of allocated portion of loan costs and taxes.
In November 2011 the company issued $300 million Senior notes which are due in December 2018. The Senior notes were
issued at 98.638% of the principal amount with a coupon of 7.375%. The Senior notes are ranked as senior obligations of the
company and rank equally in right of payment with all other existing and future senior debt. At any time prior to December 15,
2015, the Company may redeem the Notes at its option, in whole or in part, at a redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium as of, and accrued and unpaid interest to, the date of redemption. Applicable
Premium means the greater of (i) 1.0% of the principal amount of the Senior notes; and (ii) the excess of (a)the present value at
such Redemption Date of the Redemption Price of the Note at December 15, 2015 (such Redemption Price being set forth in
the table appearing below plus all required interest payments due on the Note during the period from such Redemption Date
through December 15, 2015 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate
as of such Redemption Date plus 50 basis points, over (b)the principal amount of the Note, if greater. The Notes will also be
redeemable at the Company’s option on or after December 15, 2015, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the 12-month period beginning December 15 of the years indicated below:
Year
Percentage
2015 103.688%
2016 101.844%
2017 and thereafter 100.000%
Bank credit facilities
Under the senior secured credit facility established in June 2007 the Company has an RCF of $350 million originally maturing in
2012. In January 2011 the maturity was extended to 2015. The RCF has a $45 million sub-limit for issuance of letter of credits,
whilst the bonding facility (for issuance of bid and performance bonds) included in this sub-limit under the previous RCF was in
June 2007 replaced by a separate $15 million bonding facility (later increased to $30 million). The Company may borrow USD,
or any other currency freely available in the London banking market to which the lenders have given prior consent, under the
RCF for working capital and for general corporate purposes. Borrowings under the RCF bear interest at a rate equal to LIBOR
plus a margin of 1.5% increased to 2.25% from January 25, 2011.
At December 31, 2011 and 2010, the Company had zero outstanding in cash advances, and zero and $3.6 million, respectively,
of standby letters of credit were outstanding under the RCF with an applicable margin of 1.5% per annum, and $0.1 million and
$2.3 million, respectively, of bid and performance bonds were drawn under the separate committed bonding facility of
$30 million, with an applicable margin of 1.4%. The Company has further a smaller $2 million and $10 million uncommitted bid
and performance bond facilities intended for regional use.
The Company also has an overdraft facility of NOK 50 million as part of our Norwegian cash pooling arrangement. This facility
will continue until cancelled.
Covenants
The June 2007 credit facility contains financial covenants and negative covenants that restrict the Company in various ways.
The facility provides that:
• for the RCF part the total leverage ratio (see Note 26 for definitions of leverage ratios) may not exceed 3.00:1.0 in 2010
and 2.75:1.0 thereafter (maintenance covenant). The Term Loan has an incurrence test saying the Company cannot
increase total leverage above 3.25:1.0 in 2010 and 3.00:1.0 in later test periods (rolling last 4 quarters).
In addition, the credit agreement restricts or could restrict our ability, among other things, to sell assets without the sales
proceeds being reinvested in the business or used to repay debt; incur additional indebtedness or issue preferred shares;
prepay interest and principal on our other indebtedness; pay dividends and distributions or repurchase our capital stock; create
liens on assets; make investments, loans, guarantees or advances; make acquisitions; engage in mergers or consolidations;
enter into sale and leaseback transactions; engage in transactions with affiliates; amend material agreements governing our
indebtedness; change our business; enter into agreements that restrict dividends from subsidiaries; and enter into speculative
financial derivative agreements.
The Company is in compliance with the covenants in its loan and lease agreements as of December 31, 2011.
Pledged assets
Certain seismic vessels and seismic equipment with a net book value of $55.1 million at December 31, 2010 were pledged as
security under the Company’s short-term and long-term debt. As per above the mortgage note was repaid in 2010 and the
mortgages were discharged in 2011. In addition shares in material subsidiaries have been pledged as security.
Letters of credit and guarantees
The Company had aggregate outstanding letters of credit and related types of guarantees, not reflected in the accompanying
consolidated financial statements, of $11.9 million and $63.7 million as of December 31, 2011 and 2010, respectively.
29 PGS ANNUAL REPORT 2011
100 PGS Annual Report 2011