Cirque creditors set to reject offer, sources say
Cirque du Soleil Entertainment Group filed for protection from creditors after the coronavirus pandemic forced it to close shows around the world, triggering a fight for control of one of the bestknown brands in live performance.
Cirque said it entered into a socalled stalking horse agreement with its existing shareholders, including TPG, for a US$300-million injection to help restart the business.
The TPG-led proposal would see secured creditors get 45 per cent of the equity in exchange for wiping out the vast majority of the company’s debt.
But creditors are unlikely to accept the terms of the TPG plan, according to three people familiar with the matter.
A creditor group will likely come back with a formal counter-offer by July 10, one of the people said; it has already drafted a non-binding offer, according to another one of the people.
The Montreal-based company, which has about US$1.6 billion in debt and other liabilities, requested protection through the Companies’ Creditors Arrangement Act in Canada on Monday afternoon.
The application is scheduled to be heard by the Quebec Superior Court on Tuesday and the company will also seek its immediate provisional recognition in the U.S. under Chapter 15.
Entertainment companies that depend on large crowds were among the first business casualties of the virus.
Cirque du Soleil laid off 4,679 employees — about 95 per cent of its workforce — on March 19 after shutting down 44 productions to comply with government orders around the world.
It has only one active show right now, in China.
Cirque expects to emerge from the restructuring process as a much leaner entity with about 1,000 employees initially.
About 700 of them would be in Las Vegas, where the company earned about 40 per cent of its US$1 billion in revenue last year and where it hopes to open a show as early as November, chief executive Daniel Lamarre said in an interview.
Touring shows could come back in 2021 if the virus situation allows for it, he said.
The filing starts the clock on a bidding process for control of a restructured Cirque.
Quebecor Inc. and Cirque founder Guy Laliberte have expressed interest in investing in the company.
“We know there are probably five other parties that will be interested to make an offer,” Lamarre said.
“The good news today is that we know that someone is committed to ensure the future of the company. And within 45 days, we’ll know if someone is willing to invest even more.”
The Quebec government’s investment and lending arm, Investissement Quebec, is providing US$200 million of the US$300 million to be invested by the TPGled group, which also includes existing shareholders Fosun International Ltd. and Caisse de Depot et Placement du Quebec.
The group proposes to acquire substantially all of the company’s assets for a combination of cash, debt and equity.
It says its offer has a total value of US$420 million.
Cirque’s existing secured creditors would receive US$50 million of unsecured, take-back debt in addition to the 45-per-cent equity stake, according to the proposal.
The crisis hit the 36-year-old company just as it emerged from a string of acquisitions, which helped it diversify from its original acrobatic shows but also put it deeper into debt.