Cirque du Soleil seeks protection from its creditors

Photo: Timothy A. Clary Agence France-Presse
The rapid spread of the COVID-19 has forced the Circus to suspend dozens of shows.

The recourse to court protection against creditors is an act ” required and necessary “, which puts the table at a genuine revival of the Cirque du Soleil, said Monday its president and chief executive officer, according to which the company has received five letters of intent on the part of individual investors and a firm offer : the one of its current shareholders.

The Circus has announced that its current shareholders — the american fund TPG (60 %), the chinese company Fosun (20 %) and the Caisse de dépôt et placement du Québec (20 %) — offer to inject US $300 million in the company, of which 200 million will come from a loan from Investissement Québec. The lump sum amount provides for $ 15 million to compensate 3480 terminated employees, and $ 5 million to pay for contractors and self-employed craftsmen.

“Today, we have the assurance, with the proposal of our shareholders, who are assisted by a significant loan from Investissement Québec, the Cirque du Soleil will pass through the crisis and will survive “, said in a telephone interview with the boss of Cirque du Soleil, Daniel Lamarre. The objective is to return to the rate of profitability before the crisis, but realistically, it will take two years, he said.

The proposed transaction provides for a reduction of the debt of the Circus, estimated to be approximately US $900 million. It also includes an agreement of purchase and type of stalking horse, so that the current shareholders would be the acquisition of the entire assets of the company. In fact, this convention would establish a “floor price” for an auction in the framework of a process of solicitation of investors.

The request for protection against its creditors will be presented in superior Court Tuesday. The firm of Ernst & Young will be proposed as a controller. The process of selling and solicitation will be the subject of another hearing in a week and a half.

Guarantees

“If other groups wanted to offer more, they will have a period of 45 days to manifest and they must arrive to us with sound guarantees,” said Mr. Lamarre. So far, according to the Circus, the offer to existing shareholders is the only ” fully documented and the firm received “. “What we had, what are letters of intent from people who have told us “if you ever put to creditors, we would like to make a proposal”. “There has been interest in quebec, he said, without moving into the details. (Quebecor and Guy Laliberté has already publicly expressed their wish to participate in the relaunch of the Circus.)

Among others, we will ask the potential buyers to clarify their intentions with respect to the dismissed employees of the Circus, including the financial compensation for these employees, as well as the maintenance of activities in Québec, and that they specify intentions clear in view of the resumption of activities “, said the Circus in its press release.

In addition, the purchase agreement requires that the secured creditors of the Cirque du Soleil will receive an unsecured debt of US $50 million and 45 % of the shares of the restructured company. It is also a question of reimbursement of US $50 million of a bridge loan offered by certain lenders of first rank.

The rapid spread of the COVID-19 everywhere in the world has forced the Circus to suspend dozens of shows. In march, the company has temporarily laid off 95% of its staff, or about 4700 people. Of this number, 3480 employees (excluding Las Vegas and Orlando, where there are shows residents) are affected by the severance and will share $ 15 million, stated the management on Monday. The redundancy also allows people to receive their accumulated vacation, to access the wage earner protection Program of the canadian government and unemployment. The laid-off employees will be recalled as the shows will resume.

In a separate press release, the shareholders of TPG, Fosun, the Caisse de depot have stated that they have “worked diligently to preserve the long-term value of the company” with the direction of the Circus. “We believe that our commitment today is creating a solid foundation on which society can rely to start to rebuild and reposition its brand for the future. “

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