Shareholder Information

Shareholder Information

CGG Financial Restructuring:
We need your support

Dear Shareholder,

As you know, the General Meeting convened on October 31, 2017 is a key step in CGG's restructuring process. The resolutions required for implementation of the safeguard (Sauvegarde) plan approved by the Board of Directors will be submitted to you on this occasion. This plan is supported widely by the Group’s employees and its employee works councils. It was drawn up after a very long negotiation process with CGG's main creditors and has already received the necessary approvals from lenders and bondholders for its implementation, as part of the Sauvegarde procedure in France for the listed company CGG SA and the Chapter 11 procedure in the United States for 14 key subsidiaries of the Group.

This financial restructuring plan would complement the substantial industrial transformation plan we have implemented over the last three years, which has resulted, in particular, in a halving of the Group's headcount. It constitutes a well-balanced compromise with respect to the respective rights of the various stakeholders involved, making it possible to ensure the Group’s survival in a deteriorated market context that has proved to be much more long-lasting than the outlook we had at the end of 2015: CGG's revenue was ultimately divided by three between 2013 and 2016, with no prospect of a rebound in 2017; the reduction in our liquidity position over the 2016-2017 period was much greater and faster than expected, resulting in an unaffordable debt level for the Group.

In the case in point, the restructuring plan, the terms of which are subject to your approval:

(i) allows a massive restructuring of the Group's indebtedness:
- by equitizing all of the existing unsecured debt, nearly $2 billion (Senior Notes and OCEANEs);
- by significantly extending the maturity of the secured debt, which means the Group will not have a repayment deadline before the beginning of 2023;

(ii) strengthens the Group’s finances by providing a very substantial amount of cash: nearly $300 million of net new money - enabling it to weather, if need be, delayed recovery scenarios;

(iii) satisfies the Group’s main industrial and patrimonial objectives, namely, to:
- maintain the Group’s integrity and, by being able to continue with business as usual, preserving its commercial portfolio and human capital;
- secure leeway to pursue our technological and business development;
- maintain and develop in France an internationally recognized pole of excellence in the fields of seismic and geoscience.

Overall, this financial restructuring plan must enable CGG to benefit from a financial structure that will allow it to take full advantage, at the appropriate time, of the sector’s recovery, with a pro-forma vision at the end of 2017 of nearly $500 million in liquidity for $1.2 billion of gross debt, repayable only by 2023 and 2024, and therefore around $700 million of net debt.
Implementation of this financial restructuring plan is likely to initially result in a very significant dilution for existing shareholders, but one that is proportionate to the scale of the debt equitized and will come with a better fortunes mechanism depending on the performance of the Group and, correlatively, on the trend in its share price: the free allocation of four-year warrants at a € 3.12 strike price per share and the option of participating in the rights issue with preferential subscription rights (PSR), at a discount price of €1.56 per share, with five-year warrants attached to the newly issued shares at a €4.02 strike price per share.

A negative vote by the General Meeting would have potentially disastrous consequences for CGG and its shareholders. In particular, due to the Group’s current liquidity situation, as well as the complexity of the overlapping legal procedures in France (Safeguard) and the United States (Chapter 11), the Group could be placed under judicial reorganization proceedings (redressement judiciaire) in the short term, making the possibility of a further consultation of the shareholders very unlikely. The medium-term risk for CGG and its employees would then be a dismantling of the Group, if necessary in the context of judicial liquidation proceedings in various jurisdictions. Should such proceedings be carried out, they could (i) place the shareholders in a situation where they would lose their entire investment in the Group, and (ii) reduce the prospects of the creditors, or some of them, recovering their claims. These items are detailed in section 1.8 of the Board of Directors' report, which is available on CGG website (www.cgg.com) under "General Meeting 2017".

Your participation in the General Meeting of October 31st will therefore be crucial for the future of the Group. We strongly encourage you to vote in favor of the resolutions presented at this meeting. If you support the plan, you can in particular use the voting form and empower the Chairman of the General Meeting to vote in favor of the resolutions approved by the Board of Directors.

We are confident that you have the best interests of CGG and its employees at heart and we are counting on your support for the next General Meeting.

Respectfully,

Jean-Georges Malcor                            Rémi Dorval
Chief Executive Officer                          Chairman of the Board

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