CGG S.A. and Beatrice Place-Faget

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
CGG S.A.,
Debtor in a Foreign Proceeding.
FOR PUBLICATION
Case No. 17-11636
Chapter 15
MEMORANDUM OPINION RECOGNIZING AND ENFORCING THE ORDER OF
THE FRENCH COURT SANCTIONING THE SAFEGUARD PLAN
A P P E A R A N C E S
LINKLATTERS LLP
Attorneys for the Foreign Representative
1345 Avenue of the Americas
New York, NY 10105
By: 	Margot Schonholtz, Esq.
Robert H. Trust, Esq.
Christopher J. Hunker, Esq.
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is the Foreign Representative’s Motion for an Order
Recognizing and Enforcing the Order of the French Court Sanctioning the Safeguard Plan and
Granting Related Relief, filed on December 6, 2017 (the “Motion,” ECF Doc. # 19). The Motion
is supported by the declaration of Beatrice Place-Faget (the “Place-Faget Declaration,” ECF Doc.
# 20), appointed foreign representative in this Chapter 15 case (the “Foreign Representative”),
and the declaration of Caroline Texier (the “Texier Declaration,” ECF Doc. # 21). The Motion is
unopposed. The Court issues this Opinion because this is one of the few times when a United
States Bankruptcy Court has been asked to recognize and enforce a French Safeguard Plan that
has been sanctioned by a French court. For the reasons explained below, the Motion is
GRANTED.
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I. 	BACKGROUND
CGG S.A. (the “Foreign Debtor”) and its subsidiaries (collectively, the “Group”) engaged
in substantial preparation and negotiations with its stakeholders on the terms of a comprehensive
cross-border financial restructuring (the “Financial Restructuring”). (Mot. ¶ 1.) Following
execution of a lock-up agreement (the “Lock-Up Agreement”) and a restructuring support
agreement (the “Resolutions”) with its principal creditors, the Group commenced insolvency
proceedings in multiple jurisdictions to obtain court approval of the agreed Financial
Restructuring.
On June 14, 2017 (the “Petition Date”), the Foreign Debtor commenced the Safeguard
Proceeding in the French Court and filed a Chapter 15 petition in this Court, thereby
commencing this Chapter 15 Case. In this Chapter 15 case, the Foreign Debtor requested
recognition of the Safeguard Proceeding as a foreign main proceeding under section 1520 of the
Bankruptcy Code, and on July 13, 2017, this Court entered its Order Recognizing Foreign
Proceeding (the “Recognition Order,” ECF Doc. # 17).
On July 12, 2017, with the support of its key creditor constituencies and one institutional
shareholder, the Foreign Debtor executed the Safeguard Plan in France and distributed it to its
creditors. (Place-Faget Decl. ¶ 14.) In accordance with French law, on July 28, 2017, the
Foreign Debtor convened the meetings of the committee of credit institutions and assimilated
entities (the “Lenders’ Committee”) and the bondholders’ general meeting (the “BGM”) to vote
on the Safeguard Plan. (Id.) The Lenders’ Committee voted unanimously to approve the
Safeguard Plan, and holders of approximately 93.5% in amount of High Yield Bonds and
Convertible Bonds that cast votes at the BGM also approved the Safeguard Plan, surpassing the
two-thirds in amount threshold required within each committee/meeting under French law. (Id.)
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Likewise, the Foreign Debtor’s shareholders near unanimously supported the Financial
Restructuring. (Id. ¶ 22.)
On November 20, 2017, the French Court held a hearing (the “Sanctioning Hearing”) at
which the Foreign Debtor requested that the French Court sanction the Safeguard Plan. (Id. ¶
24.)
On December 1, 2017, the French Court entered the Sanctioning Order.1 (Id. ¶ 10.) The
Sanctioning Order first overruled a convertible bondholder group’s objection against the vote of
the BGM on the Safeguard Plan, holding that the objection was inadmissible because it did not
comply with French law. The Sanctioning Order also approved the Safeguard Plan. (Id.) In the
Sanctioning Order, the French Court found that the differentiated treatment among creditors,
permitted under French law if the difference in the situation of the creditors so justifies, provided
therein was reasonable under the circumstances and justified based on objective facts, in light of
the factual evidence provided to the French Court. (Id. ¶ 11.) The French Court also noted that
the Safeguard Plan had been approved by the Lenders’ Committee, the BGM, and the
shareholders’ meeting and was supported by the employees’ representatives. Given the
overwhelming support of these stakeholders, the French Court found that the Safeguard Plan was
satisfactory in light of the interests of the creditors, the shareholders and the employees. (Id.)
Furthermore, the French Court found that the Safeguard Plan would provide CGG with sufficient
financial flexibility to ensure its sustainability and development in the context of the anticipated
market conditions, which is in the interests of all stakeholders. (Id.)
1 	An English translation of the French court’s careful and thorough Sanctioning Order, overruling the
objection and sanctioning the Safeguard Plan, is filed on the docket. (ECF Doc. # 19, Ex. C.)
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The Safeguard Plan provides, in part, as follows:
a) 	Full equitization of the principal amounts due under the High Yield Bonds and the
Convertible Bonds, the holder of which receiving their pro rata share of new
common shares of the Foreign Debtor (the “New CGG Shares”) in exchange for,
and in full and final satisfaction and discharge of, their claims; and the $86
million of accrued interest on the High Yield Bonds shall receive new second lien
senior notes in satisfaction thereof (the “New Second Lien Interest Notes);
b) 	The “exchange” of the claims under the Secured Loans into 5-year maturity notes
with a bullet repayment at maturity;
c) 	Provision of new money up to a maximum amount of $500 million;
d) 	Issuance of warrants at no cost to the Foreign Debtor’s existing shareholders
(together with the New Second Lien Interest Notes and the New CGG Shares to
be issued to the High Yield Bondholders and the Convertible Bondholders under
the Safeguard Plan, the “Safeguard Securities”) in addition to the preferential
subscription rights for the New CGG Shares.
(Mot. ¶ 10.)
II. 	DISCUSSION
A. 	Recognition And Enforcement Of The Sanctioning Order
Under section 1521(a)(7) of the Bankruptcy Code, upon recognition of a foreign
proceeding, with certain express exceptions, the Court may grant “any appropriate relief,”
including “any additional relief that may be available to a trustee” that the Court determines is
necessary to effectuate the purpose of Chapter 15 and to protect the assets of the debtor or the
interests of the creditors. 11 U.S.C. § 1521(a)(7). Appropriate relief under section 1521 includes
enforcing a foreign confirmation order. See In re Rede Energia S.A., 515 B.R. 69, 89 (Bankr.
S.D.N.Y. 2014). Relief under section 1521 will be granted “only if the interests of the creditors
and other interested entities, including the debtor, are sufficiently protected.” Id. at 90; 11
U.S.C. § 1522(a). “As with section 1521, relief under section 1507 may include recognition and
enforcement of a plan approved by a foreign court.” In re Cell C Proprietary Ltd., 571 B.R. 542,
551 (Bankr. S.D.N.Y. 2017) (citing Rede Energia, 515 B.R. at 94–95).
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Based on the Motion and the attached declarations, the Court finds that the recognition
and enforcement of the Sanctioning Order is “appropriate relief” under section 1521(a) of the
Bankruptcy Code, and also as “additional assistance” under section 1507. Recognition and
enforcement of the Sanctioning Order is necessary to ensure that the Financial Restructuring
contemplated by the Safeguard Plan and the confirmed Chapter 11 plan can be implemented to
effectuate the Financial Restructuring of the Group without disruption or adverse actions being
brought against the Foreign Debtor or its assets in the United States. The Safeguard Plan has
received overwhelming support from the Group’s financial creditors and its shareholders. The
effectiveness of the Chapter 11 plan in the Chapter 11 case is also conditioned upon, among
other things, French Court approval of the Safeguard Plan and this Court’s recognition and
enforcement in this Chapter 15 case of the order of the Sanctioning Order.
As required by section 1522 of the Bankruptcy Code, the interests of the Foreign Debtor,
its creditors and shareholders are sufficiently protected under the Safeguard Plan. An order
enforcing the Sanction Order will permit the Foreign Representative to take the actions necessary
to implement the Safeguard Plan in the United States. Absent recognition and enforcement, the
Safeguard Plan may not be fully implemented as contemplated by, and to the detriment of, the
parties who fully support the Safeguard Plan. Further, at the Sanctioning Hearing, the French
court examined and determined that the Safeguard Plan sufficiently protected the interests of all
affected creditors in accordance with French law. (Texier Decl. ¶ 9.) Consistent with French
law and procedures governing sanctioning hearings, the French Court gave interested parties the
opportunity to be heard, and heard the oral arguments of the Foreign Debtor and various
stakeholders of the Foreign Debtor and participants in the Safeguard Proceeding, including the
Convertible Bondholder Group. (Id.) The French Court also considered the written legal
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arguments and supporting evidence provided by all the parties and filed therewith. (Id.) The
French court examined, and eventually overruled in the Sanctioning Order, the Convertible
Bondholders’ objection that the Safeguard Plan’s different treatment of the High Yield
Bondholders was unreasonable and unjustified. (Id.)
Further, the Foreign Representative also seeks to permanently enjoin any parties affected
or bound by the Safeguard Plan from commencing or taking any actions inconsistent with the
Safeguard Plan or the Sanctioning Order within the territorial jurisdiction of the United States
with respect to claims or interests treated under the Safeguard Plan. The Court finds that such
relief is warranted under section 1521(e) of the Bankruptcy Code to prevent any parties from
gaining an unfair advantage over other parties in interest subject to the Safeguard Plan.
B. 	Exemption from Registration of the Safeguard Securities Under Section 1145
The Foreign Debtor has also shown that the exemption from the seller’s obligation to
register securities under federal and state securities law under section 1145(a)(1) of the
Bankruptcy Code is warranted in this case.
Section 1145(a)(1) of the Bankruptcy Code provides a limited exemption from
registration under federal and state securities law for an offer or sale of securities that are:
(a) offered or sold “under a plan”;
(b) “of the debtor, of an affiliate participating in a joint plan with the debtor or of a
successor to the debtor under the plan”; and
(c) “in exchange for a claim against, an interest in, or a claim for an administrative
expense in the case concerning, the debtor or such affiliate.”
11 U.S.C. § 1145(a)(1).
Section 1145 “shield[s] from liability under the federal securities laws those individuals
participating in the reorganization of an entity in bankruptcy” for the purpose of “encourag[ing]
satisfaction of debts or other existing interests in the debtor.” S.E.C. v. Universal Exp., Inc., 475
F. Supp. 2d 412, 425 (S.D.N.Y. 2007). Courts in Chapter 15 cases have granted relief under
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sections 1507 and 1521, applying the section 1145 exemption to the issuance of securities by
foreign debtors pursuant to a plan that satisfies the requirements of section 1145. See In re
Abengoa, S.A., Case No. 16-10754 (KJC) (Bankr. D. Del. Dec. 8, 2016) (ruling that the securities
issued by the foreign debtor were exempt from registration under section 1145 of the Bankruptcy
Code “[b]y virtue of 11 U.S.C. § 1521 and in the alternative 11 U.S.C. § 1507”); In re Quebecor
World Inc., Case No. 08-13814 (JMP) (ECF Doc. # 12) (Bankr. S.D.N.Y. July 1, 2009) (giving
full force and effect to the Canadian Sanction Order approving debtors’ reliance on the section
1145 exemption to issue securities without registration with the SEC).
As required by section 1145(a)(1), the Safeguard Securities (i) are issued “under a plan,”
as the Safeguard Plan is the functional equivalent of a Chapter 11 plan; (ii) are issued by the
Foreign Debtor, the “debtor” under section 1502 of the Bankruptcy Code; and (iii) are offered
“in exchange for a claim against [or] an interest in . . . the debtor,” as the Safeguard Plan
provides that High Yield Bondholders and the Convertible Bondholders will receive the
Safeguard Securities in exchange for and in satisfaction of their claims against an in interests in
the Foreign Debtor. The Court concludes that the French Safeguard Plan provides sufficient
disclosure concerning the securities that will be issued under the Safeguard Plan.
C. 	Chapter 15 Case Closure
The Court also finds the relief sought by the Foreign Representative to authorize the
Foreign Representative to seek entry of a final decree to close this Chapter 15 case upon notice
of presentment and deeming this Motion to be the final report required to be filed by the Foreign
Representative under Bankruptcy Rule 5009(c) is warranted. As soon as this Court’s order
becomes final and non-appealable and the Effective Date has occurred (as defined under the
Safeguard Plan), the requirements of section 350(a) of the Bankruptcy Code will be satisfied.
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The Motion sufficiently describes the Foreign Representative’s activities in this Chapter 15 case
and contains all necessary details for a final report. Other than this Motion, there are no
outstanding motions, contested matters or adversary proceedings.
D. 	Waiver of 14-Day Stay
Finally, this Court finds that a waiver of the 14-day stay of effectiveness period is
appropriate in these circumstances. The waiver will allow the Foreign Debtor to proceed
immediately with the implementation of the restructuring steps, in compliance with its
obligations under the Lock-Up Agreement, which requires that the Financial Restructuring be
implemented no later than February 28, 2018. The waiver will help the Foreign Debtor to avoid
any delay in obtaining from the AMFthe French financial markets regulatory authoritythe visa
that is necessary to begin the restructuring implementation steps.
III. 	CONCLUSION
For the reasons explained above, the Motion is GRANTED. A separate order granting
the requested relief will be entered.
Dated: 	December 21, 2017
New York, New York
_____Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
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