Restructuring Update
Paris, France - May 12, 2017
On March 3, 2017, CGG S.A (" CGG " or the " Company ") entered into a financial restructuring process with the aim of significantly reducing debt levels and related cash interest costs to align them with its cash flows. In order to facilitate such restructuring discussions held under the aegis of a mandataire ad hoc , CGG has executed non-disclosure agreements (" NDAs ") and initiated discussions with (i) certain members of the ad hoc committee representing a majority in principal amount of the secured debt (the " Secured Lenders Coordinating Committee "), (ii) members of the ad hoc Committee representing c. 40 % of the aggregate principal amount of the Senior Notes (the " ad hoc Committee of Senior Notes "), (iii) the representative of the masses of holders of OCEANEs (Convertible Bonds) (who also holds c. 8.9% of the Convertible Bonds maturing in 2019 and c. 10.0% of the Convertible Bonds maturing in 2020), (iv) DNCA, a shareholder representing c. 7.9% of the share capital and c. 7.7% of the voting rights of the Company, as well as c. 19.1% of the aggregate principal amount of the Senior Notes maturing in 2020 and c. 20.7% of the Convertible Bonds maturing in 2020 and (v) two other significant shareholders, Bpifrance Participations representing c. 9.4% of the share capital and c. 10.8% of the voting rights of the Company and AMS Energie representing c. 8.3% of the share capital and c. 8.1 % of the voting rights of the Company, (collectively the " Stakeholders ").
Pursuant to the NDAs, CGG is required to publicly disclose, by May 12, 2017, the status at that date of the negotiations regarding the financial restructuring and certain previously confidential information, including selected financial targets and additional information on its business segments.
The presentation attached hereto, entitled "Overview of the Business Plan & Financial Restructuring Proposal" and posted on the Company's investor website, summarizes the status of negotiations and (on pages 7 to 17) the previously confidential information referred to above, in particular certain information related to the Business Plan 2017-2019, which is being furnished to satisfy the Company's obligations under the NDAs as well as its public disclosure obligations in respect of all material non-public information that has been shared with the Stakeholders in the course of discussions.
Business Plan 2017-2019 outlook
In the light of market environment assumptions retained in the 2017-2019 Business Plan and the Company's industrial and financial performance, CGG proposed on March 3, 2017, when it released its results for the fourth quarter of 2016, a financial restructuring path involving the full conversion of its unsecured debt into equity and the extension of the maturities of its secured debt.
Status of the negotiations
CGG and its Stakeholders have been engaged in extensive discussions over several weeks on the terms of a financial restructuring plan to address its capital structure constraints.
To date, the positions of the various Stakeholders have not converged towards a proposal agreed by all parties. However, all the latest positions tabled by the various Stakeholders, which are detailed in the attached presentation, meet the Company's objectives of full equitization of existing unsecured debt, extension of the maturity of the secured debt and financial flexibility through inter alia additional new money to confront various business scenarios.
The principal area of negotiation has centered around the sharing of value between Stakeholders, since an amicable restructuring in France involving debt conversion into equity requires the approval of the relevant creditors and the extraordinary shareholders' general meeting, regardless of the legal priority of claims in the capital structure.
In any event, any restructuring plan that requires the full equitization of approximately $2.0 billion (including accrued interest) of Senior Notes and Convertible Bonds will result in significant dilution to shareholders and/or other investors in the Company's capital structure.
The Company has put forward a proposal that is in its corporate interest, preserves the Group's integrity and provides a framework for long-term sustainability for the Company's businesses, employees and customers. In addition, it offers to current shareholders an opportunity to participate in the Company's recovery. This proposal is supported by DNCA (in its capacity of a long standing institutional shareholder, bondholder and convertible bondholder of the Company) and the Secured Lenders Coordinating Committee. The proposal does not have the support of other Stakeholders. The proposals put forward by other Stakeholders can be seen on pages 20 to 29 and 47 to 56 of the attached presentation.
Under the terms of the Company's proposal (which is detailed in the attached presentation), the ownership percentages of the existing shareholders in the Company (see pages 39 and 41 of the attached presentation) would be:
- 4.9% after equitisation of the Senior Notes and the Convertible Bonds (the "Unsecured Debt Equitisation") but before exercise of the $4 warrants; and 10.3% after exercise of these warrants;
- 10.4% after the Unsecured Debt Equitisation and the Rights Issue with Warrants (ABSA) and the issue of New HYB with Penny Warrants but before exercise of the $4 and $5 warrants; 14.3% after exercise of the $4 warrants; and 19.4% after exercise of both the $4 and $5 warrants;
- 3.9% after the Unsecured Debt Equitisation should shareholders decide not to subscribe to the Rights Issue with Warrants (ABSA) nor to exercise their $4 warrants, after the Rights Issue with Warrants (ABSA) and the issue of New HYB with Penny Warrants. In addition, shareholders would get any proceeds from the disposal of their $4 warrants and of their preferred rights linked to the Rights Issue with Warrants (ABSA).
We will continue to seek to negotiate the terms of a comprehensive restructuring transaction that meets the Company's key objectives with our Stakeholders, and will strive to obtain sufficient support from all of their constituencies, although there can be no assurances in that respect.
CGG has an interest payment of approximately $12.4 million due on May 15, 2017 in respect of its 5.875% Senior Notes due 2020 (the " 2020 Notes "). Although it has sufficient cash on hand to make the payment, CGG has elected not to do so and to use the 30-day grace period during which it retains the right to pay the interest due to the holders of the 2020 Notes and thereby remain in compliance with the indenture governing the 2020 Notes. Failure to make such interest payment by the end of the 30-day grace period would result in an "Event of Default" under the indenture. CGG believes that it has sufficient liquidity to continue meeting all of its obligations during the grace period.
CGG will consider shortly commencing voluntary court proceedings, potentially in multiple jurisdictions. These court-supervised processes preserve the company's liquidity and the value of its business, and, as numerous companies have demonstrated, can be an effective way of achieving an efficient debt restructuring with minimal disruption to the business.
In parallel with our financial restructuring process, we remain focused on our high level of services to our customers and quality of our integrated product offerings.
Jean-Georges Malcor, CEO of CGG, comments that " The discussions have been complex due to the significant efforts required from all the Stakeholders. The proposal put forward by us is in the corporate interest of the Company. It preserves the Group's integrity and provides a framework for long-term sustainability for the Company's businesses, employees and customers. This restructuring proposal relies on a significant deleveraging with a gross debt reduction from approximately $3 billion to approximately $1 billion through conversion into equity and provides the Company with the financial flexibility to address the various recovery scenarios. Shareholders have the option to take a significant part in the recovery of the Company post-restructuring, through the rights issue and the two proposed sets of warrants. The proposal is supported by several of our key Stakeholders. We are seeking to secure the support of additional Stakeholders to this comprehensive proposal."
The trading of CGG shares and Convertible Bonds (Shares Code ISIN: FR 0013181864, Convertible Bonds maturing 2019 : FR 0011357664, Convertible Bonds maturing 2020 Code ISIN : FR 0012739548) will be suspended by Euronext until 12 May 2017, 3:30pm.
The attached presentation entitled: Overview of the Business Plan & Financial Restructuring Proposal , is a part of this press release.
About CGG:
CGG ( www.cgg.com ) is a fully integrated Geoscience company providing leading geological, geophysical and reservoir capabilities to its broad base of customers primarily from the global oil and gas industry. Through its three complementary businesses of Equipment, Acquisition and Geology, Geophysics & Reservoir (GGR), CGG brings value across all aspects of natural resource exploration and exploitation. CGG employs around 5,600 people around the world, all with a Passion for Geoscience and working together to deliver the best solutions to its customers.
CGG is listed on the Euronext Paris SA (ISIN: 0013181864) and the New York Stock Exchange (in the form of American Depositary Shares. NYSE: CGG).
Contacts
| Group Communications Christophe Barnini Tel: + 33 1 64 47 38 11 E-Mail: : invrelparis@cgg.com | Investor Relations Catherine Leveau Tel: +33 1 64 47 34 89 E-mail: : invrelparis@cgg.com |
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