CGG Euro Bonds Drop to Record After Dollar-Debt Swap Offer

  • Securities slide after being omitted from refinancing plan
  • Oil-field surveyor seeks to defer payment amid demand slump

CGG SA’s euro-denominated bonds fell to a record low after being excluded from a debt-exchange offer designed to give the troubled oil-field surveyor more time to pay liabilities.

The French company’s 400 million euros ($427 million) of 5.875 percent bonds maturing in May 2020 dropped as much as 9 cents on the euro to 65 cents, the lowest since they were issued in April 2014, according to data compiled by Bloomberg. CGG is offering to package $135 million of unsecured bonds due in 2017 and as much as $135 million of dollar-denominated notes maturing in 2021 and 2022, into a secured 2019 loan, according to a statement on Thursday.

CGG wants to extend the repayment date of its 2017 debt after reporting a $1.07 billion loss in the third quarter as oil explorers reduced budgets and deferred orders amid a slump in crude-oil prices. The company is seeking to dispose of non-core assets and raise equity, or sell a minority interest, to fund a reorganization.

“CGG’s offer is making bondholders look more closely at the company,” said Marc Pierron, a credit analyst at Spread Research, an independent credit research firm based in Lyon, France. “For the euro bondholders, and some of the holders of the 2021 and 2022 dollar notes, a small amount of debt will be made senior to them.”

Less Attractive

CGG’s 2017 notes jumped 17 cents on the dollar Thursday and were quoted at 100 cents, according to data compiled by Bloomberg.

The euro notes may look less attractive to bondholders because they pay lower yields than the dollar securities, said Pierron. The yield on CGG’s dollar notes due in 2021 was quoted at 20 percent, compared with 16 percent on the euro securities, according to Bloomberg data.

Holders of the 2021 and 2022 notes will only be able to exchange them if they offer an equal or greater amount of the 2017 bonds as well, the statement shows. Holders may also be entitled to cash as part of the swap.

CGG pulled a $350 million loan earlier this year even after boosting the proposed rate to 7.5 percentage points more than benchmarks and increasing its discount, according to people with knowledge of the deal at the time. The term loan in the exchange will pay minimum interest of 6.5 percent a year, according to today’s statement.

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