Cirque du Soleil files for CCAA protection, gets stalking horse bid

By Caroline Salls

Pittsburgh, June 29 – Cirque du Soleil Entertainment Group and some of its affiliated companies have filed for protection from creditors under the Companies’ Creditors Arrangement Act in order to restructure its capital structure, according to a news release.

Cirque du Soleil said its application under the CCAA will be heard Tuesday by the Superior Court of Quebec. If the court grants the initial order sought, the company will seek its immediate provisional recognition in the United States through a Chapter 15 bankruptcy filing.

In connection with the filing, Cirque du Soleil announced that it has entered into a stalking horse purchase agreement with existing shareholders TPG, Fosun and Caisse de depot et placement du Quebec, as well as Investissement Quebec as a debt provider, under which the sponsors would acquire substantially all of the company’s assets for a combination of cash, debt and equity.

The sponsors will also establish two funds totaling $20 million to provide additional relief to impacted employees and independent contractors.

Cirque du Soleil’s sale and investment solicitation process will be supervised by the Quebec court and a monitor to be appointed by that court. The purchase agreement sets the floor, or minimum acceptable bid, for an auction as part of that process.

Sponsor bid terms

Under the terms of the proposed purchase agreement, the sponsors will inject $300 million of liquidity into the restructured business to support a successful restart, provide relief for Cirque du Soleil’s affected employees and partners and assume some of the company’s outstanding liabilities, including those related to ticketholders affected by the cancellation of the shows.

As part of this $300 million, Investissement Quebec will provide $200 million in debt financing to support the proposed acquisition.

The purchase agreement provides Cirque du Soleil’s existing secured creditors with $50 million of unsecured, takeback debt in addition to a 45% equity stake in the restructured company, and repayment of a $50 million interim loan made by first-lien lenders.

The proposed purchase agreement further provides, as part of the $300 million of liquidity, for the creation of a dedicated $15 million employee fund to provide financial assistance to terminated employees, and a dedicated $5 million contractor fund to pay outstanding company obligations to artisans and freelance artists.

Best offer

According to the release, the proposed purchase agreement includes a lower level of post-restructuring debt relative to other bids, has no break-up fee associated with it and was the only bid to provide dedicated employee and contractor funds together with meaningful assumption of liabilities and significant commitments to Quebec operations.

The company said the sponsors’ bid was the sole fully documented and binding bid received, allowing Cirque du Soleil to advance toward an eventual restart by launching the in-court process immediately.

“With zero revenues since the forced closure of all of our shows due to Covid-19, management had to act decisively to protect the company’s future,” president and chief executive officer Daniel Lamarre said in the release.

Employees terminated

As part of its restructuring and eventual plans to restart operations, Cirque du Soleil announced the termination of 3,480 employees previously furloughed in March following the halt in revenue caused by the government-mandated shutdowns in response to the pandemic.

The company said this termination allows employees to maximize and accelerate the financial compensation that they can obtain by immediately receiving payment on account of all accrued vacation time and gaining access to the Canadian federal Wage Earners Protection Program and other unemployment assistance programs.

The sponsors’ bid and related restart plan includes a number of considerations for employees, including the creation of $15 million in assistance funds for those whose employment has been terminated and the intent to rehire a substantial majority of terminated employees, business conditions allowing, once and as mandatory shutdowns are lifted and operations can resume.

Throughout this process, the company said it has been represented by Stikeman Elliott LLP, Kirkland & Ellis LLP, National Bank Financial Inc. and Greenhill & Co.

If the court grants the initial order sought, another hearing is expected to be scheduled in 10 days, during which the court will be asked to approve the SISP and the purchase agreement.

The company is asking the court to approve the appointment of Ernst & Young Inc. as the CCAA monitor.

Cirque du Soleil Entertainment Group is a Montreal-based live entertainment company.

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