An all-star list of entertainment and media players plan to make offers Monday for Cirque du Soleil after lenders to the financially strapped business won back control of its brands last week.
Monday is the deadline for initial bids to buy or refinance the Cirque, which owed creditors US$1-billion when it shut down its shows in March because of the COVID-19 pandemic. Bankers working with the company and its lenders said concert operator Live Nation Entertainment and U.S. private equity fund Providence Equity Partners LLC are expected to submit offers and become part of a process that is expected to take several months to play out.
Cirque founder Guy Laliberté and telecom and media company Quebecor Inc. previously said they will bid for the company. Three fund managers that currently own Cirque – Texas-based TPG Capital LP, China-based Fosun Capital Group and Caisse de dépôt et placement du Québec – are also expected to be part of the process. The Cirque declined to comment on the weekend.
Over the past two months, Cirque chairman Mitch Garber and credit rating agencies have raised the possibility of the company filing for creditor protection to shed some of its debts. The move could result in significant losses for existing lenders. Sources working with Cirque said creditors may also offer to buy Cirque rather than accept a court-administered restructuring in which they would take a haircut on their loans. Lenders would then look to bring in partners to keep the company going until the COVID-19 crisis eases, venues reopen and Cirque starts generating cash.
The Caisse, which owns 20 per cent of Cirque, wants to strike a partnership with whichever entity ends up controlling the entertainment company but does not want to make a solo offer, according to one banker who works with the Montreal-based fund manager. Several bankers said Mr. Laliberté is also attempting to strike an alliance with another deep-pocketed bidder.
The Globe and Mail has agreed not to name these banking sources working for the company, lenders or potential bidders because they are not authorized to speak publicly on the matter.
Shortly after the global pandemic shut down its shows in March, Cirque laid off 4,700 employees and hired National Bank of Canada and New York investment bank Greenhill & Co. to advise on a potential sale or restructuring. In addition to dealing with Cirque’s debt, any new owner would also need to put US$100-million or more into bringing back artists and restarting the company.
“Cirque is a living organism – with a heart, a soul and a spirit – that lives, grows and recharges through its artists, its audience and its employees,” Mr. Laliberté said last month when he announced he planned to bid for the company he founded in 1984, and sold five years ago for US$1.5-billion. He predicted a “battle royale" for the company and said: “Cirque’s future will depend on patient investors who will step into the ring and be in for the long haul.”
The Cirque’s creditors, a group that includes U.S. credit and distressed fund managers, loaned the company an additional US$50-million last week, according to documents filed on a website for the company’s lenders. The financing replaced a similar-sized loan made in early May from TPG, Fosun and the Caisse.
Cirque creditors objected to the initial US$50-million loan because its terms shifted some of Cirque’s intellectual property and brands to a holding company controlled by the TPG-led group, where the brands served as collateral that could be seized by these creditors. The lenders persuaded Cirque’s board to transfer the branding rights back to the parent company in exchange for the new loan. Sources working with Cirque and for potential bidders said having all the intellectual property under one big tent makes the company more attractive to potential buyers.
Until the pandemic, Cirque shows in Las Vegas and touring troupes around the globe generated US$950-million annually in sales, according to a recent report by credit rating agency Moody’s. Under TPG’s ownership, the company borrowed to acquire rival production companies such as Blue Man Group and develop new shows. The COVID-19 crisis shut down Cirque and forced the company to stop paying interest on its debt. Moody’s expects the company to have a US$155-million cash shortfall this year, with more red ink flowing if venues remain closed and Cirque must refund ticket sales.
In late May, the Quebec government said it is willing to backstop Cirque with a loan of up to US$200-million, money meant to help the company bring back its artists and reopen shows. However, the offer is conditional on the province gaining the right to buy the company and determine who owns it. To date, bankers working with the Cirque say the company has not borrowed from the government.
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