Cirque du Soleil, one of Quebec's most internationally recognizable brands, filed for bankruptcy protection on Monday following months of meagre revenues because of the COVID-19 pandemic.
A group of existing investors, with backing from the Quebec government's investment wing, Investissement Québec, has already tabled a bid to take over the company, inject $300 million US and provide financial support for 3,500 laid-off workers.
The involvement of Investissement Québec, in the form of $200 million US in debt financing, requires the investors to commit to keeping the company's headquarters in Montreal.
In statement made early Monday afternoon, Cirque du Soleil said Quebec Superior Court will hear its application for bankruptcy protection tomorrow. If granted, the company said it will also seek bankruptcy protection in the United States.
The circus company was forced to cancel dozens of productions around the world since March, when public health guidelines began barring live entertainment events.
"For the past 36 years, Cirque du Soleil has been a highly successful and profitable organization," president and CEO Daniel Lamarre said in the statement released Monday.
"However, with zero revenues since the forced closure of all of our shows due to COVID-19, management had to act decisively to protect the company's future."
Heavily indebted before pandemic
Even before the pandemic struck, Cirque du Soleil was heavily indebted following a string of major acquisitions aimed at diversifying its business operations beyond the lavish live spectacles it's known for around the world.
It was estimated the company owed creditors around $900 million US, meaning they had effective control of the company.
The current Quebec government, headed by a nationalist centre-right party, came to power on a pledge to do more to prevent foreign takeovers of the province's marquee brands.
In May, as the Cirque's financial position looked increasingly shaky, Economy Minister Pierre Fitzgibbon expressed concerns about the possibility of creditors seeking liquidity.
He said Investissement Québec would back a recapitalization plan by the circus company's three major shareholders: Texas-based TPG Capital, Chinese firm Fosun and Quebec pension fund manager the Caisse de depot et placement.
That money, he said at the time, was incumbent on the investors meeting a number of political requirements, in addition to the pledge to keep the head office in Montreal.
Under the terms of the deal, the investors are also committing to maintaining key company leadership positions in Quebec and rehiring as many Quebec-based workers as possible. These are on top of financial commitments that include:
- $15 million US in financial help for laid-off workers.
- $5 million US to settle outstanding contracts (especially Quebec-based contractors).
- Refunds for shows cancelled because of the pandemic.
The bid by the existing investors is what's known as a stalking horse agreement, meaning it sets a minimum price and sale conditions for the company.
Other interested parties have 45 days to table competing offers, a process that will be supervised by the court.
Lamarre told Radio-Canada five other groups have expressed interest in the company. They too would benefit from Investissement Québec's financing, if they agree to its conditions, Fitzgibbon said.
The list of other potential investors is likely to include the company's co-founder and former CEO, Guy Laliberté, who sold his controlling stake back in 2015 for a reported $1.5 billion US.
Laliberté has publicly stated his interest in once again having an ownership share.