{Translated from the original French via Google Translate}
On Friday, a lawyer representing Cirque du Soleil sent a formal notice to Quebecor, asking it to withdraw or correct information published this week on its media platforms. This document, which La Presse obtained, criticizes the Journal de Montréal in particular for having published on Wednesday a text indicating that Cirque is controlled from a tax haven – which Cirque denies.
However, according to Cirque, this text is part of a campaign by Quebecor aimed at harming the company and its shareholders in the hope of obtaining an “unfair advantage”, considering that Quebecor has twice demonstrated last month his interest in Cirque du Soleil, which he would like to “acquire”. By “undue advantage”, Cirque means Quebecor seeks to thwart the company’s recovery plans to acquire it at a better price, according to two sources. These sources, well aware of Cirque’s approach, do not wish to be identified because they are not authorized to speak publicly.
Quebecor did not answer questions from La Presse regarding its interest in the Circus and did not intend to comment on the formal notice.
Cirque is going through difficult times: almost all activities have stalled due to the pandemic and the debt is weighing on the finances of the company, which must examine its strategic options. The entertainment group is asking for help from governments. The option of sheltering from creditors is still on the table.
In his April 29 text, Journal de Montréal columnist Michel Girard questions the relevance of governments helping the Cirque because the main shareholder, the American fund TPG, controls the company through CDS Luxembourg Holdings, a company registered in Luxembourg, a tax haven.
Cirque claims that this text contains “false and misleading” information. Cirque accuses Quebecor of having a hand in that article’s publishing, while also denying the information reported within.
The columnist also reiterated his comments on LCN on Le Québec matin, then on Politiquement incorrect, hosted by Richard Martineau on QUB Radio.
According to the formal notice, the chronicler’s “declared objective” was to “hinder [Cirque’s] efforts in its efforts to obtain financial assistance or financing on market terms from the governments of Canada and Quebec in the context of the current crisis.”
“Besides, there is reason to question Quebecor’s intentions, as its subsidiaries published no less than five articles on Cirque du Soleil in less than a week, which clearly aim to disparage Cirque du Soleil and its sponsors.”
the publication by the Quebecor subsidiaries of no less than five chronicles or articles on Cirque du Soleil in less than a week, which clearly aim to disparage Cirque du Soleil and its sponsors.”
Quebecor “keen interest”
Still according to Cirque, the texts are part of a context where Quebecor expressed its “keen interest in acquiring Cirque du Soleil”, in particular in two letters sent to Cirque financial advisers on April 5 and 10.
Cirque says it has “serious reasons” to believe that Quebecor, “through its media platforms, is currently seeking to undermine the process of maximizing Cirque’s value for the benefit of its stakeholders, including its creditors, lenders and employees, and to exclude interested parties from participating in “the long-term solution” [described by Quebecor], all in order to gain an unfair advantage from it.”
Such illegal and abusive maneuvers are marked by obvious bad faith.
– Guy P. Martel, lawyer for Cirque du Soleil
Friday afternoon, Quebecor director of public affairs, Marie-Josée Duhamel, told La Presse that the company had still not received a formal notice. “We will not make any comments if such a formal notice was addressed to us,” she said. Mme. Duhamel has not responded to questions about Quebecor’s interest in Cirque du Soleil. La Presse asked Quebecor again at the end of the day, without receiving any further response.
Cirque confirmed to La Presse that the formal notice had been sent.
In an interview with La Presse , the Cirque spokeswoman denied that the company was controlled from a tax haven. “The Cirque du Soleil Group does not do tax avoidance and does not use any tax structure to avoid some taxes whatsoever in Canada and in other jurisdictions where Cirque presents shows,” said Caroline Couillard.
It also maintains that Cirque is not controlled by CDS Luxembourg Holdings, that this entity is a management company which has made financial losses in the past years and that it has been in the process of liquidation for “several” months.
Shareholders inject 50 million more
The three main shareholders of Cirque du Soleil are ready to inject an additional 50 million into the organization. Official confirmation of this investment is expected to come in the next week, La Presse learned. According to our information, this capital injection aims to allow Cirque to continue on its path until a decision is made about its future.
The financing must be made in proportion to the shares held by each of the three largest shareholders, which are the American fund TPG Capital (55%), the Chinese group Fosun (25%) and the Caisse de depot et placement du Quebec (20%). TPG therefore releases 27.5 million, Fosun commits 12.5 million, while the Caisse adds 10 million. (Caisse de depot doubled its stake in Cirque in February by buying the remaining 10% stake from founder Guy Laliberté.)
Cirque has about $1 billion in debt and no longer receives any income since its activities were paralyzed by the COVID-19 crisis. The 44 shows in representation in the world were stopped. Cirque management laid off 95% of its workforce on March 19, or 4,679 employees.
Placing the organization safe from its creditors is still one of the options contemplated by management, a source familiar with the matter confirmed to La Presse. This source cannot be identified because it is not authorized to speak publicly.
In a report dated March 18, the credit rating agency Moody’s mentions a risk of default described as “high” by the end of the year. The concentration of the company’s activities in Las Vegas, where it generates around 35% of its revenues, is one of the main risks facing the Circus, it said.
For the 12-month period ended last September, Cirque generated revenues of US $950 million, according to Moody’s. For the next year, the company will need at least US $165 million, estimates the New York agency, while the Circus had access to US $120 million (including a credit facility) at the end of 2019.
Options under study
Three main options are being explored at Cirque, La Presse reported in late March.
The preferred option is government assistance. Cirque management has taken steps in this direction with Quebec and Ottawa. No specific aid has yet been announced for the Circus.
The second avenue is an injection of additional capital by existing shareholders, while the third avenue is the protection of creditors.
The situation is so critical that the Cirque management maintains that it cannot even afford to take advantage of the wage subsidy program set up by Ottawa. Management says that it cannot afford to pay its employees even if the federal government will reimburse part of it.
People with contracts with Cirque have still not been paid for work done even before the layoffs were announced in March. In some cases, these are invoices for the winter months. In other cases, the invoices date from the fall months.
The Cirque had been sold in 2015 for around US $ 1.75 billion to a group led by TPG. La Presse revealed last summer that Cirque was considering going public. Last fall, CEO Daniel Lamarre confirmed that this project was on the ice “for the moment”, arguing that the stock market was not favorable.
{ SOURCE: Richard Dufour, La Presse }
