French geophysical services company CGG is seeking stakeholder support for its financial restructuring proposal as it continues to negotiate the terms.
On March 3, 2017, CGG entered into a financial restructuring process involving the full conversion of its unsecured debt into equity and the extension of the maturities of its secured debt with the aim of significantly reducing debt levels and related cash interest costs to align them with its cash flows.
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.
According to the company’s update on Friday, 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 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.
“The discussions have been complex…”
In any event, CGG said that 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 stated that its proposal provides a framework for long-term sustainability for its businesses, employees and customers and that it offers to current shareholders an opportunity to participate in the 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 but does not have the support of other stakeholders.
CGG added it will continue to seek to negotiate the terms of a restructuring transaction that meets the company’s key objectives with stakeholders, and will strive to obtain sufficient support from all of their constituencies.
The company also said it will consider starting voluntary court proceedings, potentially in multiple jurisdictions to preserve the company’s liquidity and the value of its business. CGG further claimed this can be an effective way of achieving an efficient debt restructuring with minimal disruption to the business.
Jean-Georges Malcor, CEO of CGG, comments: “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.”
Malcor added: “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.”
Also on Friday, the geophysical company posted a net loss of $145 million for the first quarter of the year, versus a net loss of $129.7 million in the same period of 2016.
During the first quarter 2017, revenues decreased by 20% to $249 million compared to $313 million in the prior-year period.
Net debt at end of March was at $2.3 billion with $391 million liquidity.
Offshore Energy Today Staff