Annual Report 2011 - PGS

Notes to the consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 25 - Debt and Guarantees
Long-term debt
Long-term debt consists of the following:
December 31,
(In thousands of dollars) 2011 2010
Secured:
Term loan B, Libor + margin, due 2015 470,533 470,533
Senior notes, due 2018 300,000 ---
Convertible notes:
Convertible notes, due 2012 183,785 319,633
Total 954,318 790,166
Less current portion (183,785) ---
Less deferred loan costs (17,119) (6,473)
Total long-term debt 753,414 783,693
Aggregate maturities of long-term debt, expected interest payments (excluding interest rate swaps) and finance lease
obligations are as follows:
December 31,
(In thousands of dollars) 2011 2010
Year of repayment:
2011 --- 20,873
First quarter 2012 2,771 3,603
Second quarter 2012 18,491 8,342
Third quarter 2012 3,467 3,909
Fourth quarter 2012 201,167 328,524
2013 33,984 18,798
2014 31,431 24,332
2015 499,327 484,410
2016 22,125 ---
2017 and thereafter 344,250 ---
Total 1,157,013 892,791
Interest portion (a) (202,695) (102,625)
Total long term debt (including current portion) 954,318 790,166
(a) Calculation of expected interest payments are based on forward interest rates as of December 31, 2011 and 2010, respectively.
All of the trade payables per December 31, 2011 of $61.7 million mature the first quarter of 2012.
In 2011 the company made optional repurchases of the Convertible notes for a nominal amount of $153.9 million at an average
price of 98.83%. In 2010, the Company made debt repayments of $139.2 million, of which $100.0 million was an optional
prepayment of the Term Loan B (“Term Loan”) and $17.5 million was an optional prepayment of a scheduled 2011 final
repayment of the 8.28% mortgage note.
In 2011 there were no repayments of the Term Loan. In 2010, the Company made repayments of $101.5 million of the Term
Loan of which $100.0 million was optional (see above. The Company has hedged the interest rate on 64% of the borrowings
under the Term Loan (64% in 2010) by entering into interest rate swaps where the Company receives floating interest rate
based on 3 months LIBOR and pays fixed interest rate between 4.62 to 5.34% per December 31, 2011 with a remaining life of
0.5 to 2.7 years. See Note 26 for further information.
The Company’s senior secured credit facility of $950 million consists of at inception an eight-year $600 million ($470.5 million
outstanding) Term Loan (maturing 2015) and at inception a five-year $350 million Revolving Credit Facility (“RCF”) (originally
maturing 2012 and extended to 2015 in January 2011). The Term Loan, which has no financial maintenance covenants, has a
floating interest rate of LIBOR + 175 basis points. The credit agreement generally requires the Company to apply 50% of excess
cash flow to repay outstanding borrowings for financial years when the total leverage ratio exceeds 2.5:1 or the senior leverage
ratio exceeds 2:1 (see Note 26 for definitions of leverage ratios). Excess cash flow for any period is defined as net cash flow
provided by operating activities less capital expenditures and scheduled debt services during that period, minus capital income
taxes to be paid in the next period and capital expenditure committed in the period but to be paid in future periods. The
Company can make optional prepayments to reduce the outstanding principal balance at no penalty. The Term Loan is an
obligation of PGS ASA and PGS Finance Inc. as co-borrowers, is secured by pledges of shares of material subsidiaries and is
guaranteed by the same material subsidiaries. In addition, the Company may also under the $950 million credit agreement be
able to borrow an additional $400 million either as a term loan or as an RCF. Such additional borrowing would be secured by
the same collateral that secures the Term Loan and borrowings under the existing RCF.
The $400 million convertible notes ($190.6 million outstanding per December 31, 2011) were issued in December 2007 and are
due in December 2012. The convertible notes are convertible into ordinary shares of PGS ASA. The total number of shares to
be issued if all convertible notes are converted at the conversion price is 10.2 million ordinary shares, representing 4.68% of the
Company’s current issued ordinary share capital. Due to repurchases, 4.9 million shares are issuable if all the notes were
converted at December 31, 2011. The conversion price is NOK 216.19 per share and is fixed in USD based upon the fixed
exchange rate, which represented a 40% premium over the volume weighted average price of the Company’s ordinary shares
at the time of offering. The fixed rate of exchange is 5.5188 NOK per 1.00 USD and the coupon has been set at 2.7% per
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PGS Annual Report 2011 99