S&P upgrades CGG-Veritas

Standard & Poor's said it raised the corporate credit rating of Compagnie Générale de Geophysique - Veritas (CGG-Veritas) to BB from BB-, its high-yield unsecured notes to BB- from B+ and its $1.34 billion of senior secured credit facilities to BB+ with a recovery rating of 2 from BB- with a recovery rating of 3.

The outlook is stable.

The agency said the upgrade reflects CGG-Veritas' strong nine-month operating performance in 2007 and favorable perspectives, together with increased confidence that 2008 should allow for significant free cash flow and debt reduction. S&P forecasts that the adjusted debt-to-adjusted EBITDA ratio will improve to about 1.3x at the end of 2008 from the 2.3x figure expected for 2007.

The new ratings reflect CGG-Veritas' leading position, together with Schlumberger's WesternGeco, in the global oil and gas seismic sector; the benefits CGG-Veritas derives from its dual exposure to seismic services, complemented by seismic-equipment manufacturing; the global reach of its 20-vessel seismic data-acquisition fleet; access to advanced modern equipment and technology; and an attractive and growing seismic data library, S&P said.

Offsetting credit weaknesses are the sector's intense competition, the continued high cyclicality for the offshore segment and the agency's expectation that current record demand for seismic-equipment manufacturing equipment will return to more normalized levels from 2009 onward.

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