Moody's may downgrade Compagnie Generale de Geophysique

Moody's Investors Service said it placed all ratings of Compagnie Generale de Geophysique on review for downgrade following the company's announcement of an agreed merger with Veritas DGC, Inc. in a part-cash, part-stock transaction valued at $3.1 billion.

Ratings affected include the company's Ba2 corporate family rating and the Ba3 senior unsecured ratings of its two $165 million senior notes due 2015, which are one notch lower due to the relatively high proportion of secured debt ranking ahead of the notes in Geophysique's funding structure.

Moody's also changed Veritas' rating outlook to developing from stable.

The agency said the merger with Veritas will create one of the world's largest seismic oil services companies. Due to an enhanced position in offshore seismic services, greater overall scale in a cyclical, yet currently strong market and a more balanced customer mix, the transaction is likely to be beneficial to the group's business profile.

However, Moody's added that the transaction will involve the issuance of up to $1.5 billion of debt, which is fully committed through an 18-month bridge loan and subject to refinancing thereafter. This is likely to weaken the combined entity's financial ratios in the interim.

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