WHO WILL GET THE BENEFIT FROM THE BANKRUPTCY OF CIRQUE DU SOLEIL?

Until recently, Cirque du Soleil could confidently announce rides and performances – there were plans to launch the Disney show, and the regular shows were held in Germany and Mexico. But even before the pandemic has captured the minds of spectators and organizers of the circus performances, the signs of the necessary restructuring of the corporation's debt to investors became evident.

Last December, the media of Montreal reported that Cirque du Soleil was dismissing 53 employees in order to increase productivity. After that, when the epidemic began in China, a new show in Hangzhou that involved about 200 people was suspended. A little later, a new show in Las Vegas, scheduled for March 8 was closed. The company then referred to time and resources that were not enough to improve the performance.

Later, two more major shows were postponed for several weeks. Finally, on March 12, all the tours were announced to be closed, and a week later, on March 19, the layoffs began.

After the show was closed, the management of the circus announced the temporary dismissal of 95% of the employees, the total number of which at that time was 4679 people.

After Cirque du Soleil had not made any payments on the debt obligations in late March, it became clear that the brainchild of Guy Laliberte was at risk of bankruptcy.

We should recall that the founder of the Circus of the Sun sold a 90% stake to American and Chinese investors in 2015. The amount of the transaction was then estimated by experts at $ 1.5 billion. As a result, the American company TPG (60% share), which was being managed by billionaires David Bonderman and James Coulter, became the majority co-owner of Cirque du Soleil. Another part was acquired by the Chinese Fosun International (a share of 20%) and the Canadian pension fund Caisse de dépôt et placement du Québec (10%). Later in February 2020, the founder of the most famous circus in the world sold his remaining 10% to the Caisse fund.

Despite the confidence of the CEO of circus, Daniel Lamar, which he has been consistently showing in the numerous interviews over the past months, many American experts began to express concern about how the circus experiences its pre-bankrupt state during the pandemic. In particular, there was a reason to suspect that the Texas-based TPG Capital company, which is a co-owner of the circus, is considering how to make money from the bankruptcy.

Having become a creditor, the company can push the others away from the profits of the bankruptcy proceedings and receive all the money.

TPG company has transferred the majority of its trademarks to the management of a new organization at the end of March. And since the circus itself missed the payment of $ 900 million on the debt obligations and thereby paved the way for further bankruptcy, its shareholders provided a loan of $ 50 million not for the emergency needs of the circus, but for the very new company.

If the money was provided to the circus itself, then in the event of bankruptcy, the investor would be forced to step aside, the American experts say. Many lawyers call it an aggressive strategic maneuver that can be challenged by the creditors in court, because the deal was made at a time when the circus could have declared a default on the existing debts.

The representatives of TPG advocate the correctness of their actions. They argue that the independent transaction committee, existing under the board of directors of Cirque du Soleil, recommended the creation of a subsidiary. This will allow the circus to request and receive emergency financing for the maintenance of the company. Otherwise, this will not be possible, given the financial implications of the pandemic.