Cirque mulls bankruptcy among options if the show can’t go on, source says

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Cirque du Soleil Entertainment Group is exploring a restructuring involving existing shareholders and government assistance to stave off bankruptcy after shutting down all of its shows because of the novel coronavirus, according to a source familiar with the matter.

The Montreal-based company is not contemplating a bankruptcy filing currently, according to the source, but that may be an option if the recapitalization talks fail or if it’s unable to reopen shows. The preferred outcome is for existing investors to put in new funds and to obtain government support. The Globe and Mail is not identifying the source because they were not authorized to speak publicly on the issue.

“No decision has thus far been taken,” said Caroline Couillard, senior director of public relations for the company. “Cirque du Soleil Entertainment Group is working with all its partners, as well as the federal and provincial governments, to identify how to best support the company and rebuild once the global crisis subsides. … As soon as we will be able to reopen, we will become again the profitable company we were.”

Cirque laid off 4,679 people last week, about 95 per cent of its work force, including 1,373 staff at its head office. The company, founded in 1984, was forced to close all 44 of its productions around the world because of COVID-19, and revenue has evaporated. Chief executive Daniel Lamarre told The Globe at the time that he was looking forward to thinking about how to get the company back in business, and he expressed optimism that its show in China could reopen by the end of April.

He also said he had spoken to Pierre Fitzgibbon, Quebec’s Minister of Economy and Innovation, about government aid. Mr. Fitzgibbon said at a press conference last week that the government was willing to ensure Cirque had adequate liquidity to carry on. “It’s a company that made money before the crisis and will make money as soon as things restart,” he said.

Moody’s Investors Service slashed its credit rating on Cirque to junk status earlier this month, citing its deteriorating cash flow and “excessively high leverage.” Moody’s estimated in December that Cirque had just $35-million of cash on hand and $85-million available through a credit facility. Meanwhile, Cirque is expected to spend $165-million over the next 12 months on debt repayments and ticket reimbursements for cancelled shows, according to the ratings agency.

In February, Caisse de dépôt et placement du Québec increased its stake in Cirque after buying out founder Guy Laliberté and doubling its holdings in the privately held company to 20 per cent.

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