Cirque du Soleil backs restructuring plan from creditors

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Cirque du Soleil has agreed to back a restructuring plan from its creditors, which will form the baseline for any other offers for the acrobatic entertainment colossus that collapsed into insolvency after the pandemic forced it to close its shows.

The deal, to be submitted to a Quebec court Friday for approval under Cirque’s bankruptcy protection process, will see the lenders inject US$300-million to US$375-million in new money to the enterprise on top of what they are owed, a source familiar with the transaction said. But Cirque’s debt will then be reduced to US$300-million from US$1.1-billion as the creditor group takes full ownership. The Globe and Mail has agreed not to name the source as they are not authorized to speak publicly.

The would-be buyers have agreed to keep Cirque’s international headquarters in Montreal for at least five years. They also committed to setting up a US$15-million fund to pay laid-off employees and another US$5-million for contractors, according to the bid document. There is no government money in the proposal.

The creditors include Toronto-based Catalyst Capital Group Inc. and U.S. debt funds such as CBAM Partners, BlueMountain Capital Management LLC and Thomas H. Lee Partners. The group is owed most of Cirque’s secured debt. Their offer is the result of intense negotiations in recent weeks after an initial bid proposal from Cirque’s major shareholders and the Quebec government, a plan the creditors refused to support as they would recoup just a portion of what they are owed.

A symbol of Quebec artistic pride, Cirque’s roots date back to street performances in the 1980s. The enterprise expanded under founder Guy Laliberté, who sold most of his interest to a group led by TPG Capital LP for US$1.5-billion five years ago.

Known for high-flying acrobatics and otherworldly stage constructions, Cirque shows in Las Vegas and by touring troupes around the globe generated US$950-million annually in sales, according to Moody’s Investors Service. But after the COVID-19 contagion shut down its shows in March, Cirque laid off 4,700 people and began to study a restructuring.

The creditors’ offer will become a “stalking horse” bid, which provides a floor for a sales process for Cirque as part of its court-supervised proceedings. To be deemed a superior offer, a rival bid would have to be fully financed and worth at least US$1.5-million more, according to the agreement.

“The cooperation of the creditor group has been extraordinary to achieve our objective to recapitalize and revitalize the Cirque,” Catalyst Capital managing director and partner Gabriel de Alba said in a statement. “This is an important transaction and we are excited to bring back the artisans, trades and team members once it is approved.”

Previously, the major shareholders, including Texas-based TPG, Fosun Capital Group of China and the Caisse de dépôt et placement du Québec, offered to inject US$300-million to restart the company. They had planned to give the lenders US$50-million in cash, US$50-million in new, unsecured bonds and a 45-per-cent equity interest in the operation. Under the creditor proposal, those shareholders will not be left with any stake.

“When the Cirque was forced to shut down amid the pandemic, we stood with the company to stabilize the business and developed a plan for the company to re-emerge with its core values and history intact,” the shareholder group said in a statement. “We are pleased to see that the creditors have incorporated these key undertakings into their bid – including commitments to Quebec and dedicated funds for affected employees and contractors.”

After approval of the stalking horse bid, Cirque will begin its formal sale and investment solicitation process, inviting other interested parties to consider bids under the supervision of court-appointed monitor Ernst & Young. The bid deadline is Aug. 18.

Mr. Laliberté, backed by undisclosed investors and media and telecommunications company Quebecor, led by chief Pierre Karl Péladeau, have expressed interest in floating offers. A spokeswoman for Mr. Laliberté declined to comment on whether he was still planning to bid after his announcing plans in May. Quebecor did not respond to a request for comment.

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