Canadian Stage Company, Toronto's largest non-profit theatre company, laid off nine employees on Wednesday because of financial difficulties.

The theatre company lost $694,000 over the last two seasons and carries a total debt load of $1 million, forcing it to consider restructuring.

CanStage has asked the City of Toronto to guarantee its line of credit for up to $800,000 so it can restructure.

Despite the financial issues, artistic director Martin Bragg said the future of CanStage looks bright.

"What I will say to you all is, we are strong. We are thriving. We also have the loyalty of our audience, our friends ...," he told CBC News.

Bragg admits there's not much breathing room because of the big debt, but said the company has been in worse financial shape.

"There's very little room for us to fail," he said.

In a development that may be related to CanStage's financial difficulties, artistic director David Storch announced his resignation last Wednesday after less than eight months on the job.

Many Canadian theatre companies struggle with their finances, because plays can be expensive to mount and it's difficult to maintain loyal audiences.

But theatre critic Lynn Slotkin said the CanStage management lacks focus.

CanStage has abandoned its commitment to staging more intellectual plays, in favour of more popular productions such as the musical Little Shop of Horrors and Misery, based on a Stephen King story, she said.

"I think this situation has been coming for a long time ... There have been rumblings ... there have been problems here," she said.

CanStage has eight productions in its 2007-8 season. In addition to Little Shop of Horrors and Misery, it has staged dark Broadway drama The Pillowman and will present Governor-General's Award winning play December Man.