CGG launches its share capital increase with preferential subscription rights for an amount of approximately 112.2 million through the issuance of new shares, each with one warrant attached Subscription price: 1.56 per new share, each with one warrant attached Subscription ratio: 13 ABSAs for 4 Rights Subscription period: from January 22, 2018 to February 2, 2018 inclusive Trading period for Rights: from January 18, 2018 to January 31, 2018 inclusive The transaction is part of CGG s financial restructuring plan and allows the subscribers to take part in the recovery of the sector through the Warrants #2 The transaction is backstopped by DNCA (in cash) for up to approximately 71.39 million and by the Senior Note holders for the remaining unsubscribed portion (by way of set-off against claims) Paris, France January 17, 2018 CGG (the Company ) announces today the terms of its share capital increase with preferential subscription rights (the Rights ) for an amount of approximately 112.2 million (including share premium) (the Rights Issue ), by way of an issuance of shares of the Company (the New Shares ) each with one warrant attached (the Warrants #2 and together with the New Shares, the ABSAs ). The extraordinary general meeting of shareholders held on November 13, 2017 decided to reduce the share capital by a total amount of 17,485,187.71 euros, by reducing the nominal value of each share from 0.80 euro to 0.01 euro. The completion of such share capital reduction was acknowledged by the Board of Directors on January 15, 2018, with the Board s approval of a reduction of the share capital from 17,706,519.20 euros (its initial amount) to 221,331.49 euros, divided into 22,133,149 shares with a nominal value of one euro cent ( 0.01) each. The Rights Issue is part of the Company s financial restructuring plan whose main features are the following: the substantial reduction of the Company s financial indebtedness level through the equitization of nearly all 1 the amounts of principal and accrued interest (other than interest referred to below) due and unpaid on the last day of the subscription period of the Rights Issue under the Convertible Bonds and the Senior Notes (as these terms are defined at the end of this press release) (the shares issued in the context of this equitization are hereinafter referred to as the Creditor Shares 1 and the Creditor Shares 2 respectively); 1 Approximately 4.46 million of interest accrued and unpaid under the Convertible Bonds will be paid in cash, and $86 million of interest accrued and unpaid under the Senior Notes will be paid in new high-yield second lien notes or will be paid in cash over a ten-year period subject to certain terms.
a new money injection of up to approximately $500 million in the form of: o o a new notes issuance in an amount of $375 million by way of an issuance by the Company of new high yield second-lien notes governed by New York law (the Second Lien Notes ). Certain eligible holders of Senior Notes have undertaken to subscribe for the issuance of Second Lien Notes in return for a commitment fee of 7% of the total amount of the Second Lien Notes so subscribed (such fee being payable upon, and subject to, the implementation of the issuance, in cash or by way of set-off against the subscription price of the Second Lien Notes (at the Company s option)). In addition, subscribers of these new notes will also benefit from a free allocation of warrants, giving them the right to subscribe, during a period of six months from the date on which all the financial restructuring transactions have been implemented (the Restructuring Effective Date ) at a subscription price of 0.01 per new share, to 16% of the Company s share capital on a partially diluted basis after the restructuring transactions (the Warrants #3 ). In addition, the members of the ad hoc committee of holders of Senior Notes (or their assignees under certain conditions) have undertaken to backstop the issuance of the Second Lien Notes in return (x) for a backstop commitment fee equal to 3% of the total amount of the issuance, and (y) warrants giving them the right to subscribe during a period of six months from the Restructuring Effective Date at a subscription price of 0.01 per new share, to 1.5% of the Company s share capital on a partially diluted basis after the restructuring transactions (the Backstop Warrants ); ABSAs, as part of the Rights Issue; the free allocation of 22,133,149 warrants to the shareholders (the Warrants #1 ) on the basis of one Warrant #1 for one existing share; three of these Warrants #1 give the right to subscribe for a period of four years from the Restructuring Effective Date for four new shares at a subscription price of 3.12 per share. The Warrants #1 will be allocated to the same beneficiaries as the Rights pursuant to the Rights Issue, such Warrants #1 being settled and delivered concurrently with the settlement and the delivery of the Rights Issue; the free allocation of warrants to the members of the ad hoc committee of holders of Senior Notes (the Coordination Warrants ). The Coordination Warrants will give the right to subscribe for a period of six months from the Restructuring Effective Date at a subscription price of 0.01 per new share, to 1% of the Company s share capital on a partially diluted basis after the restructuring transactions; the "exchange" of the Secured Loans not repaid in cash for new high-yield first lien notes, with a five-year maturity (i.e. 2023) (the New First Lien Notes ). Following completion of the transactions contemplated in the financial restructuring plan, the Group will benefit from a balance sheet with a level of gross financial debt reduced from approximately $2.95 billon to approximately $1.2 billion.
Based on the estimated EBITDAs for the year ended December 31, 2017, the net debt / EBITDAs ratio before restructuring costs related to the Transformation Plan (leverage ratio) will be, immediately after completion of the transactions contemplated in the safeguard plan, below 2x, while it would have exceeded 7x in the absence of a financial restructuring. The final number of Creditor Shares 1, Creditor Shares 2, Warrants #3, Coordination Warrants and Backstop Warrants (and the number of new shares which would result from the exercise of the Warrants #3, Coordination Warrants and Backstop Warrants) will depend on the aggregate amount of principal and interest accrued and unpaid under the Senior Notes and the Convertible Bonds on the last day of the subscription period of the Rights Issue, the proportion of the ABSAs subscribed for by way of set-off in application of the backstop commitment of the Rights Issue by the holders of Senior Notes, and the number of Creditors Shares 1, Creditor Shares 2 and ABSA actually issued. A press release from the Company will be issued as soon as possible following the end of the centralization period of the Rights Issue in order to specify all of the final information relating to the number of securities of each category that will be issued. The issuance and admission to trading on the regulated market of Euronext in Paris ("Euronext Paris") of the Warrants #1, the Creditor Shares 1, the Creditor Shares 2, as well as the shares that would result from the exercise of the Warrants #1, Warrants #3, Coordination Warrants and Backstop Warrants are the subject of a prospectus approved by the French Financial Markets Authority ( AMF ) on October 13, 2017 under the number 17-551 and securities note supplement approved by the AMF on October 17, 2017 under number 17-559. Main terms of the Rights Issue The Rights Issue will result in the creation of 71,932,731 ABSAs, at a subscription price of 1.56 per share (i.e. 0.01 nominal and 1.55 share premium) representing a maximum gross product (including share premium) of 112,215,060.36 (assuming that the Rights Issue is fully subscribed in cash). Each shareholder of CGG will receive one Right for each share recorded in its securities account (enregistrement comptable) at the end of the fiscal day on January 17, 2018. The ABSA subscription will be made at the subscription price of 1.56 per ABSA (i.e. 0.01 nominal and 1.55 share premium), four Rights allowing their holder to subscribe for 13 ABSAs irreducibly. Subscriptions on a reducible basis will be admitted but may be reduced in the event of oversubscription of the Rights Issue in excess of 71,932,731 ABSAs. The ABSAs not subscribed on an irreducible basis will be allocated to holders of Rights who have placed orders on a reducible basis and allocated among them subject to such reduction. On the basis of the closing price of the Company s shares on January 15, 2018 of 4.488:
the issue price of the ABSAs of one euro and fifty-six cents ( 1.56) per ABSA represents a discount to their face value of 65.2% compared to the closing price of the Company s share on January 15, 2018; the theoretical value of a Warrant #1 is 0.60 euro; the theoretical value of a Warrant #2 is 0.28 euro; the theoretical value of a share ex Warrant #1 is 3.89 euros; the theoretical value of a share ex-right and ex-warrant #1 and ex-warrant #2 is 1.89 euros; the theoretical value of the Rights, taking into account the theoretical value of a Warrant #1 and the theoretical value of a Warrant #2 is 2.00 euros; the issue price of the ABSA represents a discount of 17.5% compared to the theoretical value of a share ex-right and ex-warrant #1 and ex-warrant #2; the theoretical subscription price of a New Share, excluding the theoretical value of the Warrant #2 attached to the New Share ( 1.28), represents a face discount of 71.6% compared to the closing price of the Company s shares on January 15, 2018 and a discount of 32.5% compared to the theoretical value of the share ex-right and ex- Warrant #1 and ex-warrant #2. The foregoing values do not anticipate either the actual value of the Rights during the subscription period or the value of a share ex-right, or the actual discounts, as they may materialize on the market. Given that each Right will be detached from the corresponding share on January 18, 2018, the closing price of the Company s shares on January 17, 2018 will be used by Euronext Paris as the reference price for the calculation of the theoretical value of the share ex-right and ex-warrant #1 and ex-warrant #2, as well as for the calculation of the theoretical value of the Rights. Given that the Warrants #1 and Warrants #2 will be admitted to trading on Euronext Paris on February 21, 2018, the closing price of the Company s shares on February 20, 2018 will be used by Euronext Paris as the reference price for the calculation of their respective theoretical values. The theoretical value of the Rights set forth above does not factor in the potential impact on such value resulting from the issuance of the Creditor Shares 1, the Creditor Shares 2, the Warrants #3, the Coordination Warrants and the Backstop Warrants. The Rights Issue will be open to the public in France only. ODDO BHF SCA is acting as Global Coordinator and Lead Manager for the Rights Issue.
Key characteristics of the Warrants #2 The Warrants #2 will be securities giving access to the share capital within the meaning of articles L. 228-91 et seq. of the French Code de commerce. The exercise of Warrants #2 allows the subscribers of the ABSAs (or their transferees) to take part in the recovery of the sector if CGG s share price exceeds 4.02 per share. One (1) Warrant #2 will be attached to each New Share. Upon issuance, each Warrant #2 will be detached from the New Share to which it was originally attached. The Warrants #2 will be listed on Euronext Paris separately from the existing shares of the Company, under the ISIN code FR0013309622. Three (3) Warrants #2 will entitle their holder to subscribe to two (2) new shares (the Exercise Ratio ), for a subscription price of 4.02 per new share (the holders having to exercise their Warrants #2 by multiples of three) during a period of five years from the Restructuring Effective Date. This date will be the subject of a press release. The Exercise Ratio may be adjusted as a result of transactions that the Company implements following the issuance of the Warrants #2 (scheduled for February 21, 2018), in accordance with applicable French laws and regulations and in compliance with contractual provisions, to protect the rights of holders of Warrants #2 (no adjustment will be made as a consequence of the securities issuances contemplated in the financial restructuring plan and set forth above). The new shares issued upon the exercise of the Warrants #2 will be ordinary shares of the Company of the same class as the existing shares. They will entitle their holders to all rights attached to them from their date of issue and to all distributions decided by the Company after that date and applications will be submitted periodically to have them admitted to trading on Euronext Paris under the same quotation line as existing shares (ISIN code: FR0013181864). Conditions to the settlement and delivery The transactions provided for under the safeguard plan and the Chapter 11 plan (including the Rights Issue) shall be regarded as a whole so that if one of them cannot be implemented, none of them will be implemented. The settlement and delivery of the Rights Issue must occur (i) before February 28, 2018 (or any later date as may be determined in accordance with the terms of the Lock-Up Agreement entered into by the Company on June 13, 2017 (the Lock- Up Agreement ) and the restructuring support agreement which provides for the backstop commitment of DNCA Invest and the entities managed by DNCA Finance (the DNCA Entities ) (the Restructuring Support Agreement ) and (ii) concurrently with the settlement and delivery of the Creditor Shares 1, Creditor Shares 2, Warrants #1, Second Lien Notes, Warrants #3, Backstop Warrants and Coordination Warrants. The settlement and delivery of the Rights Issue and, more generally, the completion of the financial restructuring plan, remain subject to the satisfaction (or waiver) prior to the settlement and delivery of the Rights Issue, of certain conditions precedent set forth in the private placement agreement dated June 26, 2017 (the Private Placement Agreement )
and in the preparatory documents for the issuance of the New First Lien Notes and the Second Lien Notes (the Preparatory Documents ). In addition, persons who have committed to subscribe to the Second Lien Notes in the context of the Private Placement Agreement have the right, under certain conditions, to terminate such agreement prior to the settlement and delivery of the Rights Issue. The Restructuring Support Agreement providing for the backstop commitment of the DNCA Entities of the Rights Issue may be terminated under certain conditions, prior to the settlement and delivery of the Rights Issue. The settlement and delivery of the Rights Issue, as well as the transactions provided for in the Company s financial restructuring plan might not be implemented in the following cases: (i) the breach of any representation and warranty or any covenant made by the Company or certain of its subsidiaries pursuant to the Private Placement Agreement, in each case in any material respects; (ii) the absence of execution or delivery of the final documentation related to the issuance of the New First Lien Notes and the Second Lien Notes; (iii) the occurrence or existence of any event having individually or in the aggregate a Material Adverse Effect (as such term is defined hereafter); (iv) a decision of a competent court or authority restraining or otherwise preventing the implementation of all or part of the Company s financial restructuring plan; (v) an insolvency event of the Company or certain of its subsidiaries (except as resulting from the Company s financial restructuring plan); (vi) a default under the Secured Loans or Senior Notes documentation, provided that such default has not been waived; (vii) a material breach of the Lock-Up Agreement by the Company or certain of its subsidiaries, any of the Senior Noteholders or any of the Secured Lenders, if such breach is not cured or remedied within five business days; or (viii) a material breach of the Restructuring Support Agreement by the Company that would have a significant adverse impact on the implementation or completion of the Company s financial restructuring plan, if not cured within 5 business days. In the event that the settlement and delivery of the Rights Issue is not implemented, investors that acquired Rights on the market would have acquired rights that are no longer valid, leading them to incur a loss equal to the purchase price of such Rights. In addition, if the Rights Issue is not implemented, the subscriptions to the Rights Issue will be cancelled and the amount of subscription prices paid will be returned without interest to the subscribers by the authorized intermediaries. Subscription commitments and intentions Apart from the backstop commitment of the DNCA Entities described below in the amount of approximately 71.39 million to be paid in cash, the Company is not aware of the intentions of shareholders or the members of the Company s board of directors or management bodies in connection with the Rights Issue.
Backstop In accordance with the Company s financial restructuring plan, the portion of the Rights Issue not subscribed by the holders of Rights on an irreducible and on a reducible basis will be subscribed: - by the DNCA Entities in an amount of up to 71,390,326.24 in cash; - by the holders of Senior Notes (if needed after first implementing the backstop commitment from the DNCA Entities set forth above), by way of set-off on a pro rata basis against the face value of part of their claims under the Senior Notes. The backstop commitment in cash by the DNCA Entities will be compensated by a fee equal to 10% of the amount committed (approximately 7.14 million), which will be paid in cash, whether or not their backstop commitment is actually implemented. However, no compensation or fee will be paid in respect of such backstop commitment if any of the steps of the Company s financial restructuring plan are not completed. No fee will be paid in respect of the backstop commitment of the holders of Senior Notes. The backstop commitments referred to above relate to the entire Rights Issue but do not constitute a performance guarantee (garantie de bonne fin) within the meaning of Article L. 225-145 of the French Commercial Code. They may, under certain conditions, be terminated prior to the settlement and delivery of the Rights Issue. Use of the proceeds The funds raised in cash from the Rights Issue and the issue of the Second Lien Notes (net of backstop and commitment fees and other costs, expenses or fees related thereto) will be used as follows: first, up to $250 million 2, to provide for CGG group s financial and operating needs (including (i) the payment of accrued interest under the Convertible Bonds that has not been equitized in the context of the issue of Creditor Shares 1 (i.e. an amount of approximately 4.46 million), and (ii) the payment of restructuring-related fees and expenses other than the backstop fees and expenses and all other fees relating to the Rights Issue and the issue of the Second Lien Notes); secondly, to make the initial repayment, on a pro rata basis, to the secured lenders holding senior first lien secured claims on American subsidiaries of the CGG group, the amount of such repayment being limited to a maximum of $150 million in aggregate; the balance would be kept by the Company to cover (i) its financial needs (including the payment of restructuring-related fees and expenses other than, inter alia, subscription and backstop fees and expenses) and (ii) any delay in the group s redeployment. 2 This amount being converted into euro on the basis of the exchange rate provided for in the safeguard plan, i.e. EUR 1 = USD 1.1206.
Governance The structure and composition of the Company s board of directors after the restructuring will be determined in consultation with the DNCA Entities and the members of the ad hoc committee of holders of Senior Notes who will have become and remain shareholders of the Company. The structure and composition of the board of directors will have to comply with the AFEP-MEDEF Code and will be put in place promptly and in any event no later than three months after the Restructuring Effective Date. It is also specified that certain creditors have made commitments regarding the composition of the board of directors and the appointment of the chief executive officer. These commitments are described in the Prospectus. Timetable of the Rights Issue The subscription period of the Rights Issue will begin on January 22, 2018 and end on February 2, 2018 at the end of the trading session. The listing and trading of the Rights on Euronext Paris (ISIN code FR0013310265) will begin on January 18, 2018 and will end on January 31, 2018 at the end of the trading session. The Rights that are not exercised before the end of the subscription period, i.e. before February 2, 2018 at the end of the trading session, will automatically lapse. The settlement and delivery and the admission to trading on Euronext Paris of the New Shares and the Warrants #2 are scheduled for February 21, 2018. The New Shares will entitle their holders to all rights attached to them, from their date of issue, and to all distributions decided by the Company after that date. The New Shares will be immediately assimilated to the existing CGG shares and will trade on the same quotation line as the existing shares under ISIN code FR0013181864. The Warrants #2 will be quoted separately under the ISIN code FR0013309622. Information to the public The issue of the ABSAs has been described in a French language prospectus (the Prospectus n 2 ) which comprises: the registration document of CGG, filed with the AMF on May 1, 2017 under number D.17-0486 (the Registration Document ); the update of the Company s Registration Document filed with the AMF on October 13, 2017 under number D.17-0486-A01 and the second update of the Company s Registration Document filed with the AMF on January 16, 2018 under number D.17-0486-A02; the securities note which was approved by the AMF on January 16, 2018 under visa number 18-018 (the Securities Note ); the summary of the Prospectus n 2 (included in the Securities Note). The issue of the Creditor Shares 1, the Creditor Shares 2, the Warrants #1, the Warrants #3, the Backstop Warrants and the Coordination Warrants has been described in a prospectus (the Prospectus n 1 ) which comprises the Registration Document, the update of the
Company s Registration Document filed with the AMF on October 13, 2017 under number D.17-0486-A01, the securities note which was approved by the AMF on October 13, 2017 under visa number 17-551, the summary of the Prospectus n 1 (included in the securities note referred to above), and the supplement to the securities note, which was approved by the AMF on October 17, 2017 under visa number 17-559, which includes a supplement to the summary of the Prospectus n 1. Copies of the Prospectus n 1 and the Prospectus n 2 can be obtained free of charge from the registered office of CGG, Tour Maine Montparnasse 33, avenue du Maine 75015 Paris, the Company s website (www.cgg.com) and the AMF website (www.amf-france.org). CGG draws the public s attention to the risk factors described in chapter 3 of the Registration Document, chapter 3 of the Registration Document Updates and chapter 2 of the securities note. For the purpose of this press release: Convertible Bonds means, together, (i) the convertible bonds (obligations à option de conversion et/ou d échange en actions nouvelles ou existantes), bearing interest at a rate of 1.75% and maturing on January 1, 2020, issued by the Company on June 26, 2015, and (ii) the convertible bonds (obligations à option de conversion et/ou d échange en actions nouvelles ou existantes), bearing interest at a rate of 1.25% and maturing on January 1, 2019, issued by the Company on November 20, 2012; Material Adverse Effect means any material adverse effect or material adverse change in (a) the ability of the Company or its group to implement or complete the financial restructuring plan by February 28, 2018 or such other date as may be determined in accordance with the Lock-Up Agreement and the Restructuring Support Agreement; or (b) the consolidated financial position, assets or business of the Company and its controlled subsidiaries, taken as a whole, in each case unless it arises out of, results from, or is attributable to the signature, announcement or execution of the Private Placement Agreement, the Lock-Up Agreement or the Restructuring Support Agreement (as applicable) or other documents relating to the restructuring or transactions contemplated herein or in such documents, including the financial restructuring plan; Secured Lenders means the lenders under the facilities comprising the Secured Loans; Secured Loans means, together, (i) a revolving credit facility agreement pursuant to a multicurrency revolving facility agreement entered into on July 31, 2013 by the Company, fully drawn to date, (ii) a revolving credit facility agreement pursuant to a credit agreement, entered into on July 15, 2013 by CGG Holding (U.S.) Inc. fully drawn to date, and (iii) a bullet loan agreement pursuant to a term loan credit agreement, entered into on November 19, 2015 by CGG Holding (U.S.) Inc; and "Senior Notes" means, together, (i) the high yield notes, bearing interest at a rate of 5.875% and maturing in 2020, issued by the Company on April 23, 2014, (ii) the high yield notes, bearing interest at a rate of 6.5% and maturing in 2021, issued by the Company on May 31,
2011, January 20, 2017 and March 13, 2017, and (iii) the high yield notes, bearing interest at a rate of 6.875% and maturing in 2022, issued by the Company on May 1, 2014. 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 5,300 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
Notice This announcement does not, and shall not, in any circumstances constitute a public offering of securities or an invitation to the public in connection with any offer. The distribution of this document may be restricted by law in certain jurisdictions. Persons into whose possession this document comes are required to inform themselves about and to observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement is an advertisement and not a prospectus within the meaning of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003, as amended (the Prospectus Directive ). With respect to the member States of the European Economic Area which have implemented the Prospectus Directive, no action has been undertaken or will be undertaken to make an offer to the public of the securities referred to herein requiring a publication of a prospectus in any relevant member State. As a result, the securities may not and will not be offered in any relevant member State except in accordance with the exemptions set forth in Article 3(2) of the Prospectus Directive, if they have been implemented in that relevant member State, or under any other circumstances which do not require the publication by CGG of a prospectus pursuant to Article 3 of the Prospectus Directive and/or to applicable regulations of that relevant member State. This document is not an offer of securities for sale nor the solicitation of an offer to purchase securities in the United States of America or any other jurisdiction where such offer may be restricted. Securities may not be offered or sold in the United States of America absent registration under the U.S. Securities Act of 1933, as amended (the Securities Act ), or an exemption from registration. The securities of CGG described herein have not been and will not be registered under the Securities Act, and CGG does not intend to make a public offer of its securities in the United States of America. This document is only being distributed to, and is only directed at (i) persons who are outside the United Kingdom, (ii) persons in the United Kingdom that are investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) of the United Kingdom (the Order ), (iii) persons who fall within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations, etc. ) of the Order, or (iv) any other persons to whom an invitation or inducement to engage in investment activity (within the meaning of Article 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as Relevant Persons ). This document is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this document relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Any person other than a relevant person should not act or rely on this document or any of its contents.