Cirque du Soleil creditors unhappy with its turnaround plan will oppose the purchase deal between the entertainment company and its current shareholders, which they say is “doomed to failure.”
A group of 13 institutions, including Catalyst Capital Group, which holds approximately US $ 1 billion in guaranteed debt, says that there is a way to go without financial assistance from the Government of Quebec which would still maintain Cirque’s headquarters in Montreal. .
“At no time (lenders) will consent to the proposed transaction in which secured creditors would be paid below the total amount of debt owed to them,” they said in a petition filed earlier this week with the Superior Court of Quebec.
The aerobatic company announced Monday its decision to file for creditor protection, a decision that resulted in the dismissal of nearly 3,500 employees.
Creditors say the current owners – the Texas fund TPG Capital, the Chinese firm Fosun and the Caisse de depot et placement du Quebec – should not be called harassment. This will be discussed at the next hearing, scheduled for July 10.
Creditors prefer to negotiate directly with advisers appointed by the company.
“We do not understand why the (Cirque) did not want to engage in the negotiation of a final agreement with our group by opting for an agreement with its shareholders knowing that the secured creditors had already rejected it”, a explained William Hardie, Managing Director. Houlihan Lokey, who advises creditors, in an email statement.
The current owners are proposing to inject US $ 300 million, including a US $ 200 million loan from Investissement Québec. Creditors would hold 45% of Cirque and $ 50 million in unsecured debt, while owners would share the remaining 55%. They would establish two funds totaling US $ 20 million to support Cirque employees and pay freelancers.
The proposal values the company at around $ 420 million, less than half of what is owed to secured creditors.
Cirque lost US $ 10 million in 2017, US $ 71 million in 2018 and US $ 80 million in 2019, according to the forensic auditor, while acquisitions increased revenues by almost 18% to 1.04 billion US dollars.
Since its restructuring is now supervised by the courts, Cirque would not comment on the arguments raised by its creditors.