CIRQUE DU SOLEIL: Lenders Replace Owners as Lead Bidder

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Cirque du Soleil Entertainment Group announced mid-July 2020 that it has entered into a new “stalking horse” purchase agreement with a group of its existing first lien and second lien secured lenders pursuant to which the Lenders would acquire substantially all of the Company’s assets in settlement of Cirque’s first and second lien debt.

In connection with the entering into the Purchase Agreement with its Lenders, Cirque and its existing shareholders TPG, Fosun, and Caisse de depot et placement du Quebec (the “Shareholders”) agreed to mutually terminate the asset purchase agreement announced on June 29 which notably contemplated the creation of a dedicated US$15 million employee fund to provide financial assistance to terminated employees, and a dedicated US$5 million contractor fund to pay outstanding Company obligations to artisans and freelance artists. The Shareholder’s proposed agreement, which had set the bar for other bids, assured a path to survival following the forced closure of all of the shows resulting from the COVID-19 pandemic by providing the Company funding, support, and a clear roadmap to relaunch.

The Lenders’ Purchase Agreement replicates the Shareholders’ proposal by providing for the establishment of two funds totaling US$20 million to provide relief to impacted employees and independent contractors. It also includes undertakings to maintain the businesses’ headquarters and to have its CEO be based in Montreal, Quebec.

On June 30, 2020, Cirque filed for protection from creditors under the Companies’ Creditors Arrangement Act (“CCAA”) in order to restructure its capital and the Superior Court of Quebec (Commercial Division) (the “Court”) granted Cirque’s application. A Court hearing is scheduled for July 17 during which the Court will be asked to approve the Purchase Agreement and the sale and investment solicitation process (“SISP”).

Subject to the Court’s approval, the Lenders’ Purchase Agreement will serve as the new “stalking horse” bid in a SISP supervised by the Court and the Court-appointed monitor. The Purchase Agreement sets the floor, or minimum acceptable bid, for an auction of the Company under the Court’s supervision pursuant to the SISP, which is designed to achieve the highest offer for the Company and its stakeholders.

About Cirque du Soleil

Cirque du Soleil U.S. Intermediate Holdings, Inc. is a provider of unique live acrobatic theatrical performances. The company currently operates 6 Cirque du Soleil resident shows, 6 Blue Man Group resident shows and 11 touring shows. For last twelve months ending September 30, 2018 the company’s revenue was $832 million. The company’s founder, Guy Laliberte, retains a 10% minority interest after a leveraged buyout in July of 2015. TPG Capital Group (55% share), Fosun Capital Group (25% share) and Caisse de depot et placement du Quebec (10% share) purchased 90% the company using the proceeds of the credit facilities plus approximately $630 million of cash equity contribution.

In March 2020, the circus was forced by the coronavirus pandemic to shutter dozens of shows in cities worldwide.

In early June 2020, the circus reportedly got a proposal from creditors to inject $300 million into Cirque du Soleil under a bankruptcy restructuring that also would convert the company’s $900 million in debt into a 100-percent ownership stake.

On June 29, 2020, Cirque du Soleil Entertainment Group and certain of its affiliated companies filed for protection from creditors under the Companies’ Creditors Arrangement Act (“CCAA”) in order to restructure its capital structure.

On July 1, 2020, 43 U.S. affiliates filed Chapter 15 cases in the U.S. (Bankr. D. Del.) to seek U.S. recognition of the CCAA cases. The lead case is In re CDS U.S. Holdings, Inc. (D. Del. Lead Case No. 20-11719).

The Company is being represented by Stikeman Elliott LLP, Kirkland & Ellis LLP, National Bank Financial Inc. and Greenhill & Co.

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