MONTREAL -- Cirque du Soleil’s creditors may not need a financial boost from Quebec taxpayers to relaunch the business, but their commitment to maintain the circus’ head office in Quebec won’t last long—just five years.

The creditors’ proposal, led by Catalyst Capital Group, was accepted by the Cirque’s board of directors and will be presented Friday to the Superior Court of Quebec.

It will need court approval in order to be considered a seed bid or "stalking horse bid"—the minimum conditions to be met for rivals filing competing bids—as part of the company's auction, a process that should reach its peak in late August.

Deprived of income since mid-March due to the pandemic, the Cirque has canceled its 44 shows around the world and laid off some 3,480 people, including 1,562 in Quebec, filing for bankruptcy protection. Its receivables total more than $1.6 billion USD.


But the creditors’ deal would weaken the company’s attachment to Quebec.

“The purchaser will maintain the international head office and the decision-making center in Montreal... for a minimum period of five years and thereafter according to the best interests of the company... as determined by the board administration,” reads the agreement, in part, between the Cirque and Spectacle Bidco, the entity that represents the creditors.

According to the document, the president and CEO of the circus company, Daniel Lamarre, will have to live in Quebec, as he currently does.

However, there is no such commitment with respect to the chair of the board of directors, Mitch Garber. Garber does live in the province now.

A now-ended takeover bid by the Cirque's current shareholders would have required that these two company heads stay in Quebec. The shareholders are the Texan fund TPG Capital, the Chinese firm Fosun and the Caisse de depot et placement du Quebec (CDPQ).

Unless they come back with a better offer, this trio risks being sidelined since their offer is now off the table.

Quebec’s Economy Minister, Pierre Fitzgibbon, said in a phone interview that the creditors’ lack of commitment to the head office location could create uncertainty.

“You’re right,” he said. “I assume (that the creditors) are people who know the Cirque and who will understand and accept that it is important to keep the decision-making center here.”


The lender group would inject up to $375 million in new money, according to a source familiar with the matter, but who is not authorized to speak about it publicly. 

The debt would be reduced to approximately $300 million USD, and two funds totalling $20 million USD would be set up to cover amounts owing to former workers and artisans.

“Catalyst and the group of creditors are committed to respecting the history of Cirque while preparing the company for a bright future,” said the CEO and partner of Catalyst, Gabriel de Alba.

“The lively artistic and innovative spirit of Quebec will be at the heart of our strategy.”

The now-terminated Cirque shareholders’ proposal sought to inject $300 million USD, in particular by leveraging the loan of $200 USD million offered by Investissement Québec, and it included a provision that would have enabled the Québec government to possibly buy out the foreign owners of the Cirque.

In exchange for debt restructuring, the creditors would have obtained 45 per cent of the company and an unsecured debt of US $ 50 million. However, the creditors objected to this scenario, since they would have only been reimbursed a fraction of what was owed.

As part of the auction process, other potential buyers will have until August 18 to submit an offer.


Quebecor also announced Thursday night that it would not participate in the “nearly completed legal bidding process” to take over Cirque du Soleil, though it had looked deeply into the idea.

The company, however, said it hoped the creditors would call on it for help. 

It “remains eager to contribute to the Cirque's turnaround and to leverage its experience, capital and Québec identity to do so,” it wrote in a news release.

Quebecor’s lawyer had previously said that it might be interested in a takeover. The company said Thursday it held “length discussions” with those advising the circus company’s creditors, Houlihan Lokey, until “it was forced to end them by signing a non-disclosure agreement at the request of the Cirque du Soleil.”

Cirque co-founder Guy Laliberté, who sold his latest shares as recently as February, is also studying the situation.

This report was first published by The Canadian Press on July 16, 2020.