(Boursier.com) — The quality credit of CGG has just lost two new ranks at Standard & Poor’s, which lowered its rating two notches, to “CCC+” to “CCC-”, to incorporate the latest comments of the management on the need for a new recapitalisation. He is the 19th rank, the lowest on a scale of 22. The recovery rating remains set to “2″ for the senior debt secured, rated “CCC” from “B-” so far, which means that the agency believes that there is a high probability for creditors to recover in case of default (in the top of the channel 70 to 90%). On the other hand, it goes down to 6 for the debt unsecured, denoted “C” against “CCC” previou sly, the sign of a low probability of recovery.
Debt-for-capital
As to the method, S&P think the company will very likely
to proceed to a conversion of debt to equity, which is a scenario of default in its architecture rating. The transaction is expected to take place during the first half of 2017. The outlook is “negative”, because the agency believed that it could further lower the rating to “CC” or “partial Defect” (“SD,” selective default). The analyst in charge of the case thinks that the capital structures of the current society is not sustainable, particularly in the context of the current market for the geosciences.
The decision of S&P is not surprising given the announcements of CGG, which is going to have to find a solution to lighten its balance sheet, because the efforts made so far will not be sufficient to cope with the doldrums of the sub-contractors of the oil industry. Analysts agree that the outcome will necessarily be very dilutive for shareholders and creditors would have to waive some of their claims so as to ensure the sustainability of the company.
— ©2017, Fellow.com
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