CGG: announces an agreement in principle on financial restructuring plan with its main creditors and DNCA

CGG announces an agreement in principle
on financial restructuring plan
with its main creditors and DNCA

Paris, France - June 2^nd, 2017

CGG announces that it has reached an agreement in principle on a financial restructuring plan (the "Agreement in Principle") which meets the Company's objectives of (i) full equitization of the existing unsecured debt, (ii) extension of the maturity of the secured debt and (iii) financial flexibility to confront various business scenarios through, inter alia, additional new money (the "New Money") and has garnered the support of the majority of its secured lenders, the majority of the holders of its Senior Notes and DNCA (in its capacity as a long-standing institutional shareholder, bondholder and convertible bondholder of the Company).

Status of the Financial Restructuring Process

On March 3^rd, 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 and more broadly addressing its capital structure constraints.

Following its announcement dated May 12^th, 2017, under the aegis of the mandataire ad hoc, the Company has re-engaged in discussions with certain of its main creditors and DNCA and their respective advisers, under non-disclosure agreements.

Those discussions led to the Agreement in Principle supported by (i) the Company, (ii) the Secured Lenders Coordinating Committee (representing approximately 52.7 % of the aggregate principal amount of the secured debt), (iii) DNCA (representing c. 7.9% of the share capital and 7.7% of the voting rights as well as 5.5% of the aggregate principal amount of the Senior Notes and 18.7% of the aggregate principal amount of the Convertible Bonds), as well as (iv) the members of the ad hoc Committee of the Senior Notes (representing c. 52.4% of the aggregate principal amount of the Senior Notes (the "ad hoc Committee of Senior Notes"). The representative of the masses of holders of Convertible Bonds has not supported the Agreement in Principle. The two other shareholders holding more than 5% of the Company's share capital, Bpifrance Participations and AMS Energie, who participated in the previous discussions leading to May 12^th 2017 announcement have not participated in the negotiations of the Agreement in Principle.

The Agreement in Principle is based on the same objectives as the proposal published on May 12^th, 2017 (the "May 12^th Proposal"): it is in line with the Company's corporate interest, preserves the Group's integrity, provides a framework for long-term sustainability for the Company's businesses, employees and customers, and offers its current shareholders an opportunity to participate in the Company's recovery.

The Agreement in Principle is detailed in Appendix 1 and comprises the following key elements:

• Treatment of the Senior Notes:
  • full equitization of the principal amount (plus accrued and unpaid interest not paid in kind on closing) of the Senior Notes (except for the portion that may be used as backstop for the rights issue described below) at $3.5 per share (versus $4.0 in the May 12^th Proposal);
  • $86 million accrued and unpaid interest to be paid on closing with new Second Lien Notes (versus equitization of the accrued and unpaid interest in the May 12^th Proposal);
• Treatment of the Convertible Bonds:
  • full equitization of the principal amount (plus accrued and unpaid interest not paid in cash on closing) of the Convertible Bonds at $11.5 per share (versus $15 in the May 12^th Proposal);
  • $5 million accrued and unpaid interest to be paid on closing in cash (versus equitization of the accrued and unpaid interest in the May 12^th Proposal);
• Free Warrants #1 allocated to historical shareholders with a $3.5 strike price, 4 years duration and a ratio of 4 warrants for 3 existing shares (versus respectively $4.0 strike price, 5 years duration and ratio of 6 Warrants #1 for 5 existing shares in the May 12th Proposal);
• New Money through:
  • a rights issue of $125 million (versus $75 million in the May 12^th Proposal) with preferential subscription rights for historical shareholders by issuance of new shares with Warrants #2 (ABSA) at a price of $1.75 (versus $2 in the May 12^th Proposal), the Warrants #2 having a $4.5 strike price, a 5-year duration and a ratio of 2 Warrants #2 for 3 new shares subscribed as part of the rights issue (versus respectively $5.0 strike price, 5 years duration and ratio of 1 Warrant #2 for 1 new share subscribed as part of the rights issue, in the May 12^th Proposal), backstopped by DNCA in cash for $70 million, and potentially other significant shareholders in cash or Senior Notes holders by way of set-off;
  • an issuance of new Second Lien Senior Notes with Penny Warrants (as described in Appendix 1) for $375 million (versus $350 m in the May 12^th Proposal) reserved for eligible Senior Notes holders (including a Euro-tranche in an amount to be determined);
• Amend and extend the maturity of the secured debt until 2022 (same as the May 12^th Proposal).

Under the terms of the Agreement in Principle, the ownership percentages of the existing shareholders in the Company (see page 12 of the attached presentation) would be:

-           4.5% after equitization of the Senior Notes and the Convertible Bonds (the "Unsecured Debt Equitization") but before exercise of the Warrants #1; and 10.0% after exercise of these Warrants #1;

-           13.6% after the Unsecured Debt Equitization and the rights issue with Warrants #2 and the exercise of the Penny Warrants (as described below) but before exercise of the Warrants #1 and #2; 17.2% after exercise of the Warrants #1; and 22.4% after exercise of both the Warrants #1 and #2;

-           3.2% after the Unsecured Debt Equitization, rights issue and the exercise the Penny Warrants should existing shareholders decide not to subscribe to the rights issue with Warrants #2 nor to exercise their Warrants #1. In addition, such shareholders would get any proceeds from the disposal of their Warrants #1 and of their preferred subscription rights linked to the rights issue with Warrants #2.

The Agreement in Principle has been approved in principle by the Company's board of directors. It is subject to the finalisation of the negotiations of its final terms, and the necessary documentation to launch the private placement relating to the issuance of the new Second Lien Senior Notes with Penny Warrants (including lock-up agreements and private placement agreements provided for under the Agreement in Principle to be finalized no later than June 12, 2017).

The implementation of the Agreement in Principle is subject to various customary conditions precedent including the approval of the necessary resolutions by the shareholders' meeting of the Company and obtaining the required level of support from creditors in the proceedings that would be launched in France and possibly in other jurisdictions. Assuming the applicable conditions precedent are satisfied or waived, the implementation of the Agreement in Principle is expected to occur no later than February 28, 2018.

Ordinary General Assembly postponed

In this context, with the authorization of the Commercial Court of Paris, CGG Group's Board of Directors has decided to postpone the Ordinary General Assembly expected to vote on the 2016 accounts, so that the shareholders can vote both on the 2016 accounts and the restructuring. The market will be kept informed about the schedule, in compliance with stock market rules.

Appointment of an independent expert

In accordance with the AMF General Regulation, the Company's board of directors will appoint an independent expert to issue a report on the financial restructuring.

2021 Senior Notes coupon payment due June 1^st, 2017

CGG has an interest payment of approximately $21.2 million due on June 1, 2017 in respect of its 6.5% 2021 Senior 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 2021 Senior Notes and thereby remain in compliance with the indenture governing the 2021 Senior Notes.

As a reminder, CGG had an interest payment of approximately $12.4 million due on May 15, 2017 in respect of its 5.875% 2020 Senior Notes. Although it had sufficient cash on hand to make the payment, CGG 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 Senior Notes and thereby remain in compliance with the indenture governing the 2020 Senior Notes.

Failure to make such interest payment by the end of the 30-day grace period would result in an "Event of Default" under both indentures. CGG believes that it has sufficient liquidity to continue meeting all of its obligations during the grace period. The 30-day grace period related to the 2020 Senior Notes ends on June 14, 2017.

CGG will consider commencing voluntary court proceedings shortly, potentially in multiple jurisdictions. These court-supervised processes will be pursued to implement the Agreement in Principle and preserve the Company's liquidity and the value of its business. As numerous companies have demonstrated, these processes 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.

 "Convertible Bonds" means CGG's 1.25% convertible bonds due 2019 (ISIN: FR0011357664) (the "2019 convertible bonds") and 1.75% convertible bonds due 2020 (ISIN: FR0012739548) (the "2020 convertible bonds").

"Senior Notes" means CGG's 6.500% Senior Notes due 2021 (CUSIP: 204384AB7 / ISIN: US204384AB76; CUSIP: F1704UAD6 / ISIN: USF1704UAD66) (the "2021 Notes"), 5.875% Senior Notes due 2020 (Reg. S ISIN: XS1061175607 / Reg. S Common Code: 106117560; Rule 144A ISIN: XS1061175862 / Rule 144A Common Code: 106117586) (the " 2020 Notes") and 6.875% Senior Notes due 2022 (Reg. S CUSIP: F1704UAC8 / Reg. S ISIN: USF1704UAC83; Registered CUSIP: 12531TAB5 / Registered ISIN: US12531TAB52) (the "2022 Notes").

Appendix 1: Restructuring Financial Proposal Presentation

Conference call

An English language conference call is scheduled today at 9:00 am (Paris time) - 8:00 am (London time)
             
             
To follow this conference, please access the live webcast:

A replay of the conference will be available via webcast on the CGG website at: www.cgg.com.

For analysts, please dial the following numbers 5 to 10 minutes prior to the scheduled start time:

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).

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