Catalyst Capital is among the top lenders in a group vying for Cirque du Soleil

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Private equity fund Catalyst Capital Group Inc. and a collection of U.S. lenders are the leading contenders to take over Cirque du Soleil after pledging this week to put US$300-million into reopening the troupe’s shows.

Toronto-based Catalyst, controlled by financier Newton Glassman, is among Cirque’s three largest creditors and sole Canadian player in a group of approximately 12 credit fund managers that are offering to swap approximately US$1-billion in debt for 100-per-cent ownership of the Montreal-based company, according to sources working with Catalyst, Cirque and the other lenders. The Globe and Mail has agreed not to name these sources because they are not authorized to speak for the company.

Cirque lenders are among up to seven entities that made bids for the company ahead of a Monday deadline for takeover or restructuring offers, sources said. The creditors are negotiating from a position of strength, as they have effectively controlled Cirque since the company defaulted on its debt by missing interest payments in April, after closing its shows and laying off 4,700 employees in March because of the COVID-19 virus.

Cirque’s “Land of Fantasy” show in the eastern Chinese city of Hangzhou reopened on June 3, and the company is working with Las Vegas resort owners to restart productions in the gambling hub after Nevada casinos opened their doors last week.

Cirque’s U.S. creditors include debt funds run by U.S. asset managers CBAM Partners, BlueMountain Capital Management LLC, Thomas H. Lee Partners, Shenkman Capital Management Inc, Providence Equity Partners LLC and Fidelity Investments Inc. The group said Monday in a letter to Cirque’s board of directors that they would welcome a Quebec investor or industry partner in their restructuring, and pledged to keep the head office in Montreal.

Canadian candidates for the role of Cirque investor include telecom and media company Quebecor Inc., Cirque founder Guy Laliberté and the Caisse de dépôt et placement du Québec, which currently owns 20 per cent of Cirque. Sources say Mr. Laliberté made a bid for the company on Monday, with partners.

Mr. Laliberté declined to comment. Spokespeople for Quebecor and Cirque did not immediately respond to requests for comment.

U.S. concert operator Live Nation Entertainment is also interested in a partnership with Cirque but did not make an offer this week, sources said. Feld Entertainment Inc., formerly known as Ringling Bros. and Barnum & Bailey Circus, is also circling.

Catalyst acquired the bulk of its Cirque bonds after the company turned out the lights in mid-March at a significant discount to their face value, sources said. A spokesperson for Catalyst, which manages approximately $4-billion for institutional investors and wealthy individuals, confirmed the fund manager is involved with Cirque’s restructuring, but declined to comment on the size of its stake, or what it paid for the debt.

A small amount of Cirque debt, with a face value of US$2.5-million, changed hands on public markets in March at a price equal to 42 cents for each dollar of face value. At the time, credit rating agency Moody’s and Cirque chairman Mitch Garber warned the company may need to file for court protection from creditors.

Catalyst’s Mr. Glassman has disappointed investors in the past by failing to deliver on promises to sell holdings such as Callidus Capital, Gateway Casinos & Entertainment, Therapure Biopharma and Advantage Rent A Car at lofty valuations. The Catalyst executive responsible for the Cirque investment, managing director Gabriel de Alba, recently directed a profitable investment in Hudson’s Bay Co., forcing chairman Richard Baker to sweeten a takeover offer for the department store chain.

Cirque is currently owned by a consortium of three private equity funds: Texas-based TPG Capital LLC, China’s Fosun Capital Group and the Caisse. The TPG-led group acquired Cirque from Mr. Laliberté in 2015 for US$1.5-billion. The trio would see their investment wiped out if creditors take control of Cirque.

TPG financed part of the buyout with debt, then borrowed more money to acquire productions such as Blue Man Group and mount new shows. According to sources in the creditor group, these growth initiatives failed to translate into higher profits.

On TPG’s watch, Cirque consistently generated between US$125-million and US$150-million of earnings before interest, taxes, depreciation and amortization, or EBITDA. With debt rising and little EBITDA growth, Cirque was vulnerable to the downturn that came when the pandemic closed its venues in March.

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