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Law360 (June 29, 2020, 9:07 PM EDT ) The Cirque du Soleil Entertainment Group said Monday that it will seek bankruptcy protection in Canada, lay off 3,500 employees from its worldwide acrobatic shows, and pursue a sale and reorganization as it struggles to deal with closures stemming from the COVID-19 pandemic.
The Montreal-based circus said that with all of its 44 worldwide shows suspended, it will file for Companies' Creditors Arrangement Act protection in a Quebec court Tuesday and follow that with a request for Chapter 15 protection in the U.S. as it opens up a sale process with a $300 million stalking horse bid from its current equity owners.
"For the past 36 years, Cirque du Soleil has been a highly successful and profitable organization. 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," CEO Daniel Lamarre said in the announcement.
The company said that as a "necessary" part of its restructuring, almost all of the 3,500 employees furloughed in March will be laid off. The company said the artists and staff at its resident shows in Las Vegas and in Orlando, Florida, will not be included in the layoffs in the expectation that those shows will be among the first to reopen.
Under the stalking horse bid, current equity owners Texas-based TPG Capital, China's Fosun International Ltd. and Canadian pension fund Caisse de depot et placement du Québec will receive all of Cirque du Soleil's assets in exchange for $300 million and an assumption of all liabilities, including for tickets to suspended shows.
The bid also includes a $15 million fund for laid-off employees, a $5 million fund to pay the circus' contractors and a pledge to keep the business in Montreal, the announcement said.
As part of the deal, government body Investissement Québec will provide $200 million in debt financing.
The company said that under the reorganization, existing secured creditors will receive a 45% share in the reorganized company and $50 million in new unsecured takeback debt, along with repayment of $50 million in certain first-lien loans.
The company said although the company has seen a "high level' of investor interest, the stalking horse was the "sole fully documented and binding bid received."
"Among other things, the purchase agreement contemplates a lower level of post-restructuring debt relative to other bids, has no break fee associated with it and was the only bid to provide dedicated employee and contractor funds together with meaningful assumption of liabilities and significant commitments to Quebec operations," the company said.
The company said it would seek the appointment of Ernst & Young Inc. as its Canadian insolvency supervisor. It said it has been represented by Stikeman Elliott LLP, Kirkland & Ellis LLP, National Bank Financial Inc. and Greenhill & Co.
Cirque du Soleil was founded in Montreal in 1984 and had about 4,900 employees worldwide. TPG, Fosun and Caisse purchased a combined 90% share in the company in 2015 for a reported $1.23 billion.
--Editing by Stephen Berg.
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