Cirque du Soleil files for creditor protection, terminates 3,480 jobs

A performer balances a lightbulb on his head during a preview of the Cirque Du Soleil production of "Kurios - Cabinet of Curiosities" in Sydney, Tuesday, Oct. 1, 2019. The Cirque du Soleil, whose aerobatic shows have been halted by COVID-19, has filed for creditor protection while it develops a plan to restart its business.THE CANADIAN PRESS/AP/Rick Rycroft

MONTREAL - The Cirque du Soleil, whose aerobatic shows have been halted by COVID-19, has filed for creditor protection while it develops a plan to restart its business.

The company says it will seek court protection from creditors under the Companies' Creditors Arrangement Act at a hearing Tuesday at Quebec Superior Court.

Cirque du Soleil also announced the termination of approximately 3,480 employees previously furloughed in March.

"We know, because of the proposal on the table, that the Cirque is saved," CEO Daniel Lamarre said in a phone interview. "I am sure that at the end of the process, which should culminate in mid-September, I will have an owner.”

However, he said he regrets the end of the employment relationship of thousands of employees with the company, which has US$900 million in debt.

In connection with the filing, Cirque du Soleil says it has entered into a "stalking horse" purchase agreement with its existing shareholders.

The Texan fund TPG Capital (with a 60 per cent stake), the Chinese firm Fosun (20 per cent) and the Caisse de depot et placement du Quebec (20 per cent) will inject US$100 million, while Investissement Quebec will provide a US$200-million loan.

Two funds totalling US$20 million will also be set up to support Cirque workers and pay freelancers who are still waiting.

It says the sponsors' bid includes an intent to rehire a substantial majority of the terminated employees, business conditions allowing, when its operations can resume.

The company added that given that its resident shows in Las Vegas and Orlando are expected to resume before the rest of the its shows, the artists and show staff of the resident shows division are not affected.

Lamarre said there are "five to six groups" interested in acquiring the Montreal-based company, but they will have to meet the conditions of the offer currently on the table, which requires Montreal to remain the company headquarters.

"Everyone was waiting for us to take shelter from our creditors," said Lamarre, who added he doesn't believe the company waited too long before filing for creditor protection.

In exchange for debt restructuring, creditors will receive unsecured debt of US$50 million in addition to owning 45 per cent of the Cirque, which will decrease the current shareholders' stakes. TPG would hold 33 per cent, while Fosun and the Caisse will each have 11 per cent.

Cirque said its shareholders' offer was the "only fully documented and firm" offer received.

With US$300 million, the company will be able to weather the current storm until it can start generating revenue again, likely as soon as its permanent shows in Las Vegas and Orlando can resume.

For the 12-month period ended last September, Cirque would have generated revenues of approximately US$950 million, the rating agency Moody's calculated in a report published last March. Its profits were estimated at US$155 million.

This report by The Canadian Press was first published June 29, 2020.

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