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Members of Cirque du Soleil perform in a preview of Totem on April 8, 2010, in Montreal.Paul Chiasson/The Canadian Press

With almost no revenue coming in and creditors on its heels, you’d think Cirque du Soleil would be jumping at Pierre Karl Péladeau’s offer to ride to the rescue.

The deeply indebted Montreal-based entertainment colossus, which was forced to close all of its permanent and touring shows in mid-March, is so far, however, turning a cold shoulder to the Quebecor Inc. chief executive officer’s plan to “save the Cirque.”

The bad blood running between Mr. Péladeau and Cirque chairman Mitch Garber may have something to do with that. The Quebecor chief’s previous stint as leader of the separatist Parti Québécois does not exactly ingratiate him to the federal politicians whose assistance he has sought in protecting the Cirque’s Montreal head office, either.

But ignoring Mr. Péladeau’s overtures may not be an option for long.

For now, the Cirque has secured a US$50-million lifeline from its current shareholders, led by Texas-based TPG Capital, while it seeks aid packages from the federal and Quebec governments and works on a restructuring that could involve filing for court protection from its lenders under the Companies’ Creditors Arrangement Act.

Mr. Péladeau counters that his proposed solution, under which Quebecor could pump “hundreds of millions of dollars” into the Cirque, would avoid a bankruptcy filing – a process that “could lead to an outcome that political authorities will regret.”

At stake is the future of the Cirque’s Montreal head office, which, in normal times, employs more than 1,500 people. All but a handful of those employees, along with more than 3,000 performers and artists, have been laid off pending the relaunch of six shows in Las Vegas and more than a dozen big-top and arena shows that tour the planet.

The Cirque was facing serious problems even before the coronavirus pandemic struck. In the months leading up to the crisis, it was dogged, according to Moody’s Investors Service, by “weak liquidity” and “excessively high leverage” owing to a US$900-million debt load and the flop of its latest Vegas show, R.U.N, which cost more than US$60-million to develop and closed after only five months.

In April, Mr. Péladeau wrote to four federal cabinet ministers from Quebec to inform them of Quebecor’s interest in participating in a plan to rescue the Cirque and place the entertainment company again under Canadian control. Since founder Guy Laliberté sold most of his stake in 2015, TPG has owned 55 per cent of the Cirque. Most of the remaining shares are held by China’s Fosun Capital and Caisse de dépôt et placement du Québec. The latter increased its stake to 20 per cent in February by purchasing Mr. Laliberté's remaining 10-per-cent stake.

“The Cirque’s financial position is extremely precarious,” Mr. Péladeau said in an interview. “Management was forced to lay off 4,600 people, some of whom have not been paid, and the company hasn’t applied for the [75-per-cent Canada emergency] wage subsidy to bring them back to work because it doesn’t have the means to pay the rest of their salary. … It has an urgent need for liquidity.”

The US$50-million cash injection from TPG, Fosun and the Caisse may not buy the Cirque enough time to avoid a bankruptcy filing. A court-led debt restructuring would be particularly complex in the Cirque’s case, since much of its debt was spun off by its initial lenders into collateralized loan obligations (CLOs) held by multiple entities.

Mr. Péladeau worries that a court proceeding could see creditors taking control of the Cirque. He argues the Cirque would be a good corporate and cultural fit with Quebecor, a telecommunications and media juggernaut in Quebec that recently created a sports and entertainment division into which the Cirque could be easily integrated.

TPG is apparently open to including Quebecor in discussions about a potential recapitalization of the Cirque, but Quebecor has refused to sign a non-disclosure agreement (NDA) in advance of any talks. “What is being asked of us is totally unacceptable,” Mr. Péladeau countered, saying the terms of the NDA go too far.

Even if Mr. Péladeau were to gain a seat at the table, however, the discussions would be awkward. Cirque chair Mr. Garber, who befriended Mr. Laliberté when he ran Caesar Entertainment Corp.’s online gambling unit, is a long-standing rival of the Quebecor CEO. In 2015, he used an appearance on a popular Radio-Canada talk show to harshly criticize Mr. Péladeau’s business acumen, an incident Mr. Péladeau has not forgotten.

Mr. Garber also maintains close ties with prominent Quebec Liberals, including Foreign Affairs Minister François-Philippe Champagne. In 2018, Mr. Champagne tapped Mr. Garber to chair the board of Invest in Canada, a newly created federal agency that promotes foreign investment in Canada.

To complicate matters, the Cirque’s lawyers sent a libel notice to Quebecor demanding it to retract parts of an April 27 column in Le Journal de Montréal that argued against a federal bailout of the Cirque on the basis of TPG’s operations in certain offshore tax havens. The Cirque said that TPG’s structure has no bearing on taxes paid by the Cirque in Canada, where it is headquartered and subject to federal and Quebec tax laws.

“There is no tax avoidance, I guarantee that,” Cirque CEO Daniel Lamarre insisted in an interview.

Mr. Lamarre declined to comment directly on Quebecor’s overtures, saying that his “role as CEO is to work with existing shareholders. If someone else has something to say, they should say it to the shareholders.”

Mr. Lamarre, who was picked by Mr. Laliberté to lead the Cirque’s business operations in 2001, added that the company is working on a recapitalization plan that would enable it to survive until a COVID-19 vaccine or treatment reassures spectators that it is safe to attend crowded live entertainment shows again.

“We are hoping for a rapid process of restructuring of the company,” he said. “Shareholders are holding discussions with the different levels of government. We’re not talking about subsidies. We’re talking about investments.”

It may take some nifty acrobatics, however, if the Cirque is to avoid Mr. Péladeau’s embrace.

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