Under this program, the Company will transfer the ownership of a portion of its MC3D data library to a 100% owned subsidiary that, in turn, will issue cumulative preferred stock to a third party investor. The proceeds from this sale of the preferred stock will be approximately $240 million and will be transferred to PGS as partial compensation for the data transfer. As PGS executes its business plan and continues to sell its MC3D data library, a significant portion of future data sales will be used to redeem the preferred stock as well as pay the minimum preferred dividend. Once the full $240 million plus accrued dividends are repaid through future data sales, all remaining data sales will remain with the Company.
The proceeds from the preferred stock to be issued by this PGS subsidiary, which will be received by PGS as a result of this transaction, will be repayable solely from future data sales. Under certain unlikely circumstances, the control of this subsidiary could transfer to the preferred share investor. However, PGS will always have the rights, through various alternatives such as preferred share redemption and preferred share and data call options, to prevent such loss of control.
PGS’ objectives with respect to this program are primarily related to improvements in working capital. In addition, PGS’ management hopes that this securitization program will ultimately serve as a revolving type facility which can be used in the future to improve the management of the Company’s liquidity and working capital and to provide funding for future data library investments.
Chairman and Chief Executive Officer of Petroleum Geo-Services, Reidar Michaelsen, said, “This transaction is a first for the geophysical business. We are aware that many of our competitors have attempted similar programs in the past without success. It is a tribute to the quality of the PGS data library, the management of this library and sales track record established by PGS that such a transaction was possible. We commend our finance team on its success and hard work sorting out all of the obstacles that arose in this process.”
Michaelsen went on to say, “This transaction will allow PGS to effectively collect today the cash from future MC3D data sales and accelerate its debt reduction program. The cost of these funds is competitive with the cost we have been incurring on our outstanding debt, and through this program we have retained all of the upside in connection with our data library. There are no penalties associated with an early redemption of the preferred stock, and therefore PGS has also retained flexibility going forward.”