CGG – PGS reached an agreement in principle with its main lenders
All,
PGS is a key comparable for the CGG business, when it comes to the underlying business. However, PGS did not undertake the significant financial and operational restructuring that CGG implemented since 2017. As a result, both its liquidity profile, its leverage profile, and its business profile (ie exposure to marine data acquisition) started the coronavirus crisis on a much weaker shape. As databases in the seismic sector are mostly non-overlapping, CGG is likely to see only limited benefit from the disruption of the PGS business as a result of the debt restructuring. However, we continue to see CGG as a much better capitalized player, and the exit from the marine acquisition business in 2019 should see cash outflows from discontinued operations going away after 2020. We remain long the CGG bonds.
PGS has reached an agreement in principle with its main lenders. The agreement involves mainly an extension of the maturities of the RCF and the term loans, a covenant reset, and forbearance agreement to avoid an enforcement action, in exchange for a cash sweep mechanism and some cash/PIK fees. PGS also noted that the recent recovery in oil prices did not lead to an increase in spending in the sector, a trend also noted by CGG in its latest quarterly results call.
We are looking forward to exchanging ideas on CGG with you.
Juliano
Juliano Torii
2 Stephen Street
London W1T 1AN
E: jtorii@sarria.co.uk
M: +44 794 73 56 163 (preferred)
T: +44 203 744 7055