French oil services firm CGG files for bankruptcy
August 2017 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
August 2017 Issue
In a bid to reduce its $3bn debt, French oil services company CGG has announced that it is to undergo a comprehensive prearranged restructuring involving a Sauvegarde proceeding in France and Chapter 11 and Chapter 15 filings in the US.
As part of the restructuring, CGG is seeking an agreement with the required majorities of creditors and, subject to their support and the plan’s approval by shareholders’ general meeting, the agreement will become binding on all creditors following court approval.
Along with legal proceedings in the US and France, CGG and a number of its financial creditors entered into a lock-up agreement in June 2017, pursuant to which the relevant parties committed to support and to take all steps and actions reasonably necessary to implement and consummate the restructuring plan.
The lock-up agreement has been signed by: (i) an ad hoc committee of secured lenders, who
hold collectively approximately 53.8 percent of the aggregate principal amount of the group’s
secured debt; (ii) an ad hoc committee of senior noteholders, who collectively hold approximately 52.4 percent of the aggregate principal amount of CGG’s senior notes; and (iii) DNCA Finance, which holds 5.5 percent of the aggregate principal amount of CGG’s senior notes and approximately 20.7 percent of the aggregate principal amount of its convertible bonds.
Additionally, CGG has entered into a restructuring support agreement with DNCA Finance (in its capacity as shareholder) in connection with its holding of 7.9 percent of CGG’s share capital, pursuant to which DNCA commits to take all steps and actions reasonably necessary as a shareholder to implement the restructuring, including voting in favour of the relevant shareholder resolutions and not selling its shares in CGG during the reorganisation process.
Under the terms of the proposed restructuring agreements, upon emergence, approximately
$1.95bn in debt will be eliminated from CGG’s balance sheet through full equitisation of the principal amount of unsecured debt and the maturity of $800m of existing secured debt will be extended. The lock-up agreement includes a requirement for creditors to vote in favour of the Sauvegarde and Chapter 11 plans (subject to receiving appropriate disclosure materials).
While the legal process to implement balance sheet restructuring and create sustainable capital structure continues, CGG has stated that it fully expects day-to-day operations to proceed as normal (with sufficient liquidity being held) during the French Sauvegarde and the US Chapter 11 and Chapter 15 processes. Furthermore, CGG has confirmed that it will maintain payments to vendors in the normal course for all goods and services provided.
“CGG has accomplished major steps in its comprehensive financial restructuring plan,” said Jean-Georges Malcor, chief executive of CGG. “The agreement-in-principle with our main creditors and DNCA has been signed and the restructuring plan meets our objectives of substantially reducing the debt on our balance sheet while preserving the integrity of the CGG Group. CGG will continue normal business operations during this process, and the restructuring transactions will not affect relationships with our clients, business partners, vendors or employees.
“We will maintain our commitment to operational excellence and our customers can be confident that they will continue to receive the best-in-class service and support and innovative solutions they are accustomed to without interruption.”
CGG’s legal advisers for the Sauvegarde and Chapter 15 case are Linklaters LLP and Weil Gotshal & Manges (Paris) LLP, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is handling the Chapter 11 component. Financial adviser and restructuring adviser for CCG are Lazard and Morgan Stanley and Alix Partners, LLP, respectively.
Mr Malcor concluded: “We expect that our financial restructuring can move forward quickly to strengthen our balance sheet and to position the company well for the future.”
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