S&P puts CGG on watch

Standard & Poor's said it placed its BB long-term corporate credit rating on Compagnie Générale de Géophysique (CGG) on CreditWatch with negative implications.

"The CreditWatch placement follows CGG's announcement today that it is making a $900 million offer to competitor Petroleum Geo Services AS (PGS) for its seismic operations," S&P credit analyst Eric Tanguy said Thursday.

Out of the $900 million purchase price, $100 million will be paid in Compagnie Générale de Géophysique shares and $800 million are expected to be funded through newly raised debt (50% through long-term convertibles subscribed by Compagnie Générale de Géophysique's new strategic partner, Canada-based ONEX).

The current rating on Compagnie Générale de Géophysique reflects the group's weak operating profitability in the context of a capital-intensive and competitive industry and vulnerability to changes in the euro/U.S. dollar exchange rate and to volatile crude-oil prices.

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