French geophysical services company CGG is planning to undertake financial restructuring to improve its balance sheet as the company’s debt level is ‘too high.’
According to a statement by the geophysical company on Thursday, in a market that remains difficult, multi-client sales are estimated at circa $135 million in the fourth quarter of 2016, with a level of prefunding in line with the target, a prefunding rate above 80% on an annual basis, but an after-sales volume below expectations.
At the group level, the company’s 4Q revenues are expected to be the highest quarterly revenues in 2016. Net debt should amount to circa $2.315 billion as at December 31, in line with the target to be below $2.4 billion at the end of 2016.
CGG noted that, given the difficult market environment, the company, as a protective measure, engaged in discussions starting December 9 with various lenders, French and US revolving credit facilities and the Nordic loan, and they agreed on December 31, 2016, to “disapply” the maintenance covenants at that date.
Debt too high
In this context, with a market environment expected to remain similar in 2017 and to continue to weigh on its revenues, the company stated it considers that the group’s debt level is too high. The company further added it intends to start discussions with all the stakeholders in their various jurisdictions in order to achieve a financial restructuring.
The objective of this restructuring would be to provide the company with a level of indebtedness and cost of debt that is substantially reduced and sustainably adapted to its revenues, CGG explained. To that end, the company said it will make proposals to its creditors and to its shareholders.
CGG also said that, in order to facilitate discussions with all stakeholders, the company wishes to have the ability to request the appointment of an ad hoc representative, which requires the agreement of the relevant creditors, in accordance with the various credit agreements and bond documents.
Jean-Georges Malcor, CEO, CGG, said: “After the effective execution of our industrial Transformation Plan and in market conditions that are expected to remain very difficult, our priority is now to improve our balance sheet and quickly restore financial flexibility to the company.”