Photo: Cirque du Soleil
The current owners of the Circus are proposing to inject $ 300 million, in particular thanks to the loan of 200 million offered by Investissement Québec.
Irritated by the approach of Cirque du Soleil in its recovery strategy, its creditors intend to object to the purchase agreement entered into between the entertainment company and its current shareholders, which, in their opinion, is ” doomed to failure “.
A group comprised of 13 institutions, including the toronto firm Catalyst Capital Group, which holds the guaranteed debt of about US $1 billion of the company, believes, instead, that it is his proposal that should be privileged. It does not need a financial support from the québec government, and would maintain the headquarters of Cirque in Montreal.
“In no time, [lenders] are not going to consent to the proposed transaction in which the secured creditors would be paid below the total amount of the debt that is owed to them “, they argue in a motion filed with the superior Court of Quebec earlier this week. The document was written after the Circus that is deprived of income since mid-march due to the pandemic of COVID-19, has announced on Monday its decision to turn to the Law on arrangements with creditors of the companies, a decision which has resulted in 3480 layoffs.
In the opinion of the lenders, the proposal of the current owners — the fund texan TPG Capital, the chinese company Fosun and the Caisse de dépôt et placement du Québec, should not be considered as the starting point for the auction. This is what they will claim, in particular, at the next hearing scheduled for July 10. Creditors wish to rather have a chance to negotiate directly with the advisors appointed by the company.
“We do not understand why the [Circus] did not want to engage in the negotiation of a definitive agreement with our group opting for an agreement with its shareholders, knowing that the secured creditors had already rejected it,” said William Hardie, managing director of the firm Houlihan Lokey, who advises the creditors, in a statement sent Friday by email.
We do not understand
— Houlihan Lokey
Since its restructuring is now supervised by the courts, the Circus did not want to comment on the arguments raised by its creditors.
The current owners of the Circus are proposing to inject $ 300 million, in particular thanks to the loan of 200 million offered by Investissement Québec. In exchange for a debt restructuring, the creditors would receive 45 % of the Circus as well as a unsecured debt $ 50 million, while the current owners would share the remaining 55%. They will establish two funds amounting to $ 20 million to support the workers of the Circus, and to pay the freelancers who are still waiting.
“The offer values the company at around 420 million, which represents less than half of what needs to be paid to creditors of first rank “, it is in the query.
According to information given by various media, the creditors would have already proposed, last month, to convert the debt guarantee actions to put the hand on the whole of the Circus, which would have eliminated the existing shareholders. The document filed with the superior Court emphasized that lenders were willing to increase their bet by injecting $ 375 million of new money, compared to 300 million originally planned.
“The agreement made with the shareholders, seems to be the result of an unfair process with multiple holes and in which the company and its trustees have promoted the interests of their shareholders,” argues the petition, which alleged that the creditors have learned only 24 hours in advance the intentions of the Circus of appeal to the courts.