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A man and woman walk by the Cirque du Soleil Big Top in Montreal's Old Port, on March 21, 2020.Graham Hughes/The Canadian Press

Toronto financier Newton Glassman’s Catalyst Capital Group Inc. and other senior creditors of Cirque du Soleil look set to win control of the famed circus troupe after no other investors stepped up with a competing bid.

Cirque suitors had until 5 p.m. ET Tuesday to submit offers that would trump a US$1.2-billion bid by Catalyst and a group of about a dozen senior lenders, but no superior proposal materialized, Cirque spokeswoman Caroline Couillard said. The winning offer was seen as extremely hard to beat by outside observers watching the process unfold.

Montreal-based Cirque now finds itself without a local shareholder in its ownership ranks for the first time since its founding in 1984. Founder Guy Laliberté cashed out his remaining 10-per-cent stake for US$75-million this year and pension fund giant Caisse de dépôt et placement du Québec also appears to be out of the picture after writing down to zero its entire US$170-million investment in the company.

The creditor victory doesn’t mean that Cirque’s ownership is set in stone, however. The lenders could bring in other minority investors to bolster the group and some could exit their positions if the picture shifts in the weeks ahead.

“Current creditors may not want to remain full owners of the entire company for long and they may be seeking partners,” said Louis Hébert, a business strategy specialist at HEC Montréal business school. What matters is that Cirque get “back on its feet,” he said.

Cirque filed for creditor protection on June 30 in Canada and shortly afterward in the United States, listing debt owing to secured creditors of about US$1.1-billion. The company’s revenue fell to nearly zero in the spring as its acrobatic live shows were shut down by government-mandated bans on public gatherings because of the coronavirus pandemic.

The creditors were negotiating from a position of strength, as they have effectively controlled Cirque since the company defaulted on its debt by missing interest payments in April after closing its shows and laying off 4,700 employees. Their US$1.2-billion bid became the offer-to-beat in the sales process for Cirque, usurping an initial bid by Cirque’s former shareholders – U.S. private equity fund manager TPG Capital, China’s Fosun International and the Caisse.

The lenders’ winning offer involves swapping about US$1-billion in debt for 100-per-cent ownership of Cirque. They will also inject up to US$375-million of new money into the company, whose debt would be reduced to US$300-million. Cirque debt was changing hands for 30 to 40 cents on the dollar during the early days of the pandemic in late March and April.

Cirque’s U.S. creditors include debt funds run by U.S. asset managers CBAM Partners, BlueMountain Capital Management LLC, THL Credit, Shenkman Capital Management Inc., Providence Equity Partners LLC and Fidelity Investments Inc. The group has pledged to keep Cirque’s head office in Montreal for at least five years.

Cirque creditors have consistently said they are open to partnerships with an entertainment company or a Quebec-based investor. Sources say there have been no talks to date between the creditors and the Caisse, an impasse that reflects the Caisse’s contractual ties to the former owners, led by TPG. Banking sources said the creditors are willing to wait for more venues to open, and cash to come in, in order to talk to additional potential investors from a position of relative strength.

The Globe and Mail has agreed to grant sources for this story confidentiality because they were not authorized to speak on the matter publicly.

Possible partners that could jump back into the fray at some point in the future include Mr. Laliberté or Quebecor Inc., which pulled out of the sales process weeks ago when it looked like creditors would win control. Chief executive officer Pierre Karl Péladeau this month expressed his interest in striking a deal with the creditors to get involved in Cirque, saying the media company is “considering this as a possible opportunity to grow” its business.

In the near-term, the creditors’ priorities are getting a new Cirque board in place and working with management to reopen shows, said one source close to the group. There are no plans to replace Cirque CEO Daniel Lamarre, the person said.

“The creditors have delivered a great outcome for the Cirque. The recapitalization provides employees, artists and partners with a reinvigorated platform to deliver our shows to our audiences worldwide,” said Gabriel de Alba, Managing Director and Partner at Catalyst.

“Now with the company’s recent missteps put behind, we are eager to close the transaction quickly and support the company as it rekindles the magic and artistry that have made Cirque du soleil an iconic global brand and creative force. Our future will take the Cirque digital and prioritize best-in-class governance and social responsibility.”

Anne Dongois, spokeswoman for Mr. Laliberté, declined to comment.

More than two dozen potential bidders signed confidentiality agreements to win the right to examine the financials of cash-strapped Cirque in the preliminary stages of the process. Among them were U.S.-based investment banking firm Goldman Sachs Group and Feld Entertainment, a U.S.-based live show production company that began with the now-defunct Ringling Bros. and Barnum & Bailey Circus, a source has said.

“There’s something saddening in seeing this important Montreal-based cultural enterprise that was built on creativity, innovation and artistic excellence pass from one investment firm to another,” said Patrick Leroux, a professor at Concordia University in Montreal who has written about the industry.

“At the same time, I’m sure Catalyst is coming in with a clear-headed plan to rekindle the value of this company with international brand recognition and the ability to attract the best artists, artisans and managers. There is an opportunity for a leaner, more focused company whose livelihood in liveness and risk-taking will survive the pandemic.”

A judge for the Superior Court of Quebec now has to approve the winning bid in a hearing that has to take place within seven days. The current scheduled deadline to finalize the transaction is Sept. 30.

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