Cirque du Soleil U.S. affiliate makes Chapter 15 bankruptcy filing

By Caroline Salls

Pittsburgh, July 2 – Cirque du Soleil Entertainment Group U.S. arm CDS U.S. Holdings Inc. made a Chapter 15 bankruptcy filing Wednesday in the U.S. Bankruptcy Court for the District of Delaware to gain U.S. recognition of its Companies’ Creditors Arrangement Act proceedings.

As previously reported, Cirque du Soleil and some of its affiliated companies have filed for CCAA creditor protection in the Superior Court of Quebec in order to restructure its capital structure.

In connection with the CCAA filing, Cirque du Soleil entered into a stalking horse purchase agreement with existing shareholders TPG, Fosun and Caisse de depot et placement du Quebec, as well as Investissement Quebec as a debt provider, under which the sponsors would acquire substantially all of the company’s assets for a combination of cash, debt and equity.

According to a document filed in the Chapter 15 cases, the U.S. cases “serve a critical role in effectuating the marketing of the debtors’ business and assets.”

The company said the sale and investment process seeks proposals for a potential recapitalization of equity investment in, or the sale of the CDS group’s assets.

In addition, CDS said the Chapter 15 cases prevent stakeholders from filing lawsuits in the United States that will interfere with the restructuring process.

The sponsors will also establish two funds totaling $20 million to provide additional relief to impacted employees and independent contractors.

Under the terms of the proposed purchase agreement, the sponsors will inject $300 million of liquidity into the restructured business to support a successful restart, provide relief for Cirque du Soleil’s affected employees and partners and assume some of the company’s outstanding liabilities, including those related to ticketholders affected by the cancellation of the shows.

The purchase agreement provides Cirque du Soleil’s existing secured creditors with $50 million of unsecured, takeback debt in addition to a 45% equity stake in the restructured company, and repayment of a $50 million interim loan made by first-lien lenders.

The proposed purchase agreement further provides, as part of the $300 million of liquidity, for the creation of a dedicated $15 million employee fund to provide financial assistance to terminated employees, and a dedicated $5 million contractor fund to pay outstanding company obligations to artisans and freelance artists.

Ernst & Young Inc. is serving as the CCAA monitor.

Cirque du Soleil Entertainment Group is a Montreal-based live entertainment company. The Chapter 15 case number is 20-11719.

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