(Bloomberg) -- Cirque du Soleil Entertainment Group, which is restructuring under court protection in Canada, accepted a recapitalization offer from a group of lenders, people with knowledge of the matter said.
The ad hoc committee of creditors, which represents holders of about $760 million in Cirque debt, formally presented a “credit bid” that would see lenders inject at least $300 million of new capital into the live-performance company to eventually restart its shows. The offer, previously reported by Bloomberg, was accepted by a committee of Cirque’s board Tuesday night, the people said, asking not to be identified because the information is private.
The proposal would see first-lien creditors, who were owed more than $900 million as of March 31, wind up with virtually all of the equity. The offer will replace a stalking-horse bid made by TPG and other Cirque shareholders in June.
But there’s still a chance existing shareholders could wind up with an equity stake. Cirque has agreed to allow other interested parties to begin negotiating with the creditors’ group about alternative deals, according to people with knowledge of the matter. TPG has made overtures about engaging with the creditors, the people said.
Credit bidding involves canceling outstanding debt as part of an offer to acquire a debtor’s assets. The creditors’ offer is expected to head for a court hearing on July 17. Other potential bidders have until Aug. 10 to present competing proposals, and an auction should happen no later than Aug. 17. A transaction should be concluded by Sept. 14.
A Cirque spokesperson declined to comment, citing a non-disclosure agreement and confidentiality of the recapitalization process. A TPG spokesman and a representative for the creditors’ committee declined to comment.
On June 8, the creditors’ group offered to inject $300 million -- an amount that could rise to $375 million -- into Cirque under a restructuring plan that would convert the company’s debt into a 100% ownership stake, according to a letter seen by Bloomberg.
The new offer maintains the major points of that letter and proposes keeping Cirque’s head office in Montreal and establishing a fund for its employees.
The company filed for protection last month after the coronavirus pandemic forced it to close shows around the world, triggering a fight for control of one of the best-known brands in live performance.
Cirque had entered into a stalking-horse agreement with its shareholders -- TPG, China’s Fosun International Ltd. and Caisse de Depot et Placement du Quebec. Creditors immediately rejected that offer, which would have left them with a 45% equity stake.
As of March 31, Cirque owed its first-lien creditors $901 million and its second-lien creditors $154 million. It also owed $32 million to the Caisse and an equal amount to Fonds de solidarite des travailleurs du Quebec.
Cirque had $1.47 billion in liabilities at the end of 2019, about five times shareholders’ equity.
(Updates to add board acceptance of proposal in second paragraph)
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