Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Members of Cirque du Soleil train while preparing to resume presentations, in the Riviera Maya in Cancun, state of Quintana Roo, Mexico on July 17, 2020.

ELIZABETH RUIZ/AFP/Getty Images

A group of creditors holding about one-quarter of the junior-ranked debt of Cirque du Soleil is challenging in a U.S. bankruptcy court the way the sales process for the entertainment company is playing out, saying its interests are being trampled by larger lenders.

A small ad hoc group of second-lien lenders holding about US$40-million in debt filed an objection in the United States Bankruptcy Court for the district of Delaware late Tuesday, protesting the way Cirque’s restructuring under creditor protection in Canada is progressing and arguing the U.S. court should not recognize certain decisions made here without a fair hearing. They’re being represented by U.S.-based law firms White & Case LLP and Farnan LLP, and by Montreal-based Langlois Lawyers LLP.

Lawyers for the group, which calls itself the Ad Hoc Committee of Independent Second Lien Holders, argue the Delaware court should not automatically rubber-stamp the rulings made by the Superior Court of Quebec, the main jurisdiction in which the case is being heard. They say that under U.S. bankruptcy law, they are being short-changed by terms of the stalking horse bid for Cirque approved by a Quebec judge last month.

Story continues below advertisement

“Second-lien lenders will get nearly nothing” for their contribution of approximately US$154-million to the US$1.2-billion credit bid, the group says in its objection to the stalking horse offer. “This makes no economic sense.”

In credit bidding, a secured creditor bids the face value of the debt it holds in order to buy the business of a debtor.

The developments throw a wrench into what has been a speedy trip so far through bankruptcy court for Cirque, which saw its revenue fall to nearly zero in the spring as its acrobatic live shows were shut down by government-mandated bans on public gatherings.

Under the current Quebec court-sanctioned timeline, Cirque suitors have until Aug. 18 to submit bids that top what creditors are offering, with the entire sales process set to conclude by the end of the month. Even if the Canadian court approves the final sale, the new objection could affect its approval in the United States.

Cirque filed for creditor protection June 30 in Canada and shortly afterward in the United States, listing debt owing to secured creditors of about US$1.1-billion. The ad hoc group of independent second-lien creditors is not objecting to the Quebec court’s jurisdiction to hear the case, only to the recognition in the United States of some of the Quebec court’s orders as it relates to certain aspects of the sales process.

The junior lenders’ chief objection centres on the stalking horse bid approved by a Quebec judge, which set a floor price and terms for any subsequent offer for Cirque.

The bid was made by holders of Cirque’s first-lien debt, who have said they also hold two thirds of its second-lien debt. The first-lien group includes Toronto-based Catalyst Capital Group Inc. and U.S. debt funds, such as CBAM Partners, BlueMountain Capital Management LLC and THL Credit.

Story continues below advertisement

The ad hoc group of second-lien lenders says first-lien lenders will get a recovery of more than 100 per cent on their claims under the stalking horse bid, while the second-lien holders will get nothing beyond warrants for equity with a strike price that denies them any definitive recovery. They say the first-lien lenders are using an “inflated” credit bid to discourage other potential bidders who might offer more cash for Cirque, and therefore maximize the value for all stakeholders.

The junior lenders also say Cirque has failed to submit several of the most recent Quebec court orders to the Delaware court for review. The group says it is taking legal steps to obtain more information on how the first-lien lenders came up with their valuation for Cirque.

Spokesmen for Cirque du Soleil and Ernst & Young, the company’s court-appointed monitor in Canada, did not respond Wednesday to requests for comment. A spokesman for the first-lien lenders was not available to comment.

The creditor bid replaces a previous stalking horse bid made by Cirque’s current shareholders. Those shareholders, TPG Capital LP, Fosun Capital Group and Caisse de dépôt et placement du Québec, would be wiped out under the first-lien creditor proposal.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies