Moody's affirms Cirque du Soleil on add-on

Moody's Investors Service said it affirmed CDS U.S. Intermediate Holdings, Inc.'s (Cirque du Soleil) B3 corporate family rating following news that the company is raising $120 million in senior unsecured debt to fund an acquisition of The Works Entertainment.

Cirque du Soleil has drawn $60 million for the acquisition and expansion projects with the remaining $60 million available to be drawn for one year starting in June 2019.

Moody's also said it affirmed the company's B2 first-lien secured instrument rating, Caa2 second-lien secured instrument rating and B3-PD probability of default rating.

The outlook remains stable.

Moody's said it does not rate newly raised senior unsecured debt.

The ratings reflect the company's very high leverage of 8.3x pro forma for $120 million increase in debt, the agency said.

This is due to a high level of discretionary borrowing, continued underperformance in several key areas previously targeted for growth, as well as relative stagnation of its existing core performing arts business, Moody's said.

While the acquisition of The Works Entertainment further diversifies the company's live show repertoire, the relatively small size of EBITDA contribution, limited cost saving synergies and weakness in the acquired asset's financial controls tempers the increased diversification, the agency explained.

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