Lenders Object to THQ Bankruptcy Sale

Lenders Object to THQ Bankruptcy Sale

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THQ's rapid-fire sale is facing opposition from both lenders and the trustee overseeing the bankruptcy process.

THQ announced on December 19 that it had entered into an agreement with Clearlake Capital Group on a "stalking horse bid" that would see the company pay a little over $60 million for "substantially all" of THQ's assets, including the studios and franchises under its control. The sale process allows other interested parties to enter competing bids, but they must beat Clearlake's initial bid to do so. But THQ also limited the process to 30 days, which U.S. Trustee Roberta DeAngelis said in an objection filed with the court "is too short of a window to let interested parties participate in the sales process."

DeAngelis claimed in the objection that the sales process being rushed because of the actions of a secured lender, who will be repaid under the terms of the agreement. She further stated that the breakup fee and expense reimbursements, at $1.75 million and $500,000 respectively, are "excessive" compared to the relatively small cash portion of the sale, and that the bidding procedure as it stands allows only a "small subset of people" to take part.

Shortly after DeAngelis filed her objection, a similar objection from creditors including Silverback Asset Management, Third Avenue Focused Credit Fund and Wolverine Flagship Fund Trading was also filed, asking that the proposed bidding procedure not be approved. "Rather than facilitating 'an open and fair public sale' and 'enhancing competitive bidding,' the Debtors' proposed Bidding Procedures appear to have been expressly designed to chill bidding and ensure that the Debtors consummate the sale of their business 'as a whole' to Clearlake, regardless of whether such a sale is in the best interests of the Debtors' unsecured creditor," the objection states.

"Simply put, the timeframe during which the Debtors seek to consummate the sale is too short a period for prospective bidders to be in a position to bid on the Debtors' assets. In order to comply with the Bidding Procedures' accelerated timeline, prospective bidders would be required to, among other things, conduct comprehensive due diligence and obtain financing (if necessary) within four (4) days of the hearing on the Bidding Procedures Motion," it continues. "This difficulty is compounded by the fact that the Debtors have proposed that this expedited process beconducted during the holiday season, a time during which the Debtors and their professionals know most people in the Debtors' industry - - i.e., the parties that might be most willing to bid on the Debtors' assets - - are 'shut down' or not available."

The group also expressed concern that Clearlake will have too much control over the bidding process and that the focus on keeping THQ whole and a "going concern" isn't necessarily in the best interests of its unsecured creditors. The proposed process would allow THQ to reject bids for anything less than all of its assets, even if "there is reason to believe that more value may be generated by a sale of the Debtors' assets on a 'piecemeal' basis." There's even an allegation that Jason Rubin, who took over as president of THQ in May 2012, and his partner Jason Kay orchestrated a "takeover" of THQ to "capture, for themselves, the significant 'upside' value in the Debtors' business. "The Jasons," as the suit calls them, replaced former members of management with their own team and, within two weeks of Rubin's hiring, brought in Centerview Partners LLC, which had previously backed Rubin in prior transactions, to find "an investor that would provide new liquidity to fund the Debtors' business plan, or a buyer for substantially all of the Debtors' assets."

What happens next is anybody's guess, but it looks like THQ's plan for a quick-and-easy 30 Day Fire Sale Extravaganza might just be a little more complicated than we expected.

Sources: Distressed Debt Investing, VentureBeat

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To be fair, in this sort of proceeding, thirty days actually is pretty short, and I suppose the debtholders- aside from wanting to get the maximum price they can- are worried that it's basically an inside job of sorts.

Rich people fighting over scraps of money, trying to shoulder check each other out of the way and get the most for themselves.

Vultures picking a carcass apart have more grace and dignity.

Rest in piece THQ!!!! I won't forget you actually making the ps2 launch actually worthwhile with the summoner and later Red faction :( WAAAAAAAAAAAAAAaaaahhh .........

I certainly hope Ubisoft's bid in this still stands. At least the assets would be landing in the hands of people familiar and successful in the gaming industry (potentially ensuring all of THQ's current projects stay their course) rather than be sold to a company who'd rather liquidate them for money and essentially doom everything they've been working towards.

Ya...I don't want to see the THQ we know...die. They need better sense with money, but that aside, they make some really good games.

Mortis Nuncius:
I certainly hope Ubisoft's bid in this still stands. At least the assets would be landing in the hands of people familiar and successful in the gaming industry (potentially ensuring all of THQ's current projects stay their course) rather than be sold to a company who'd rather liquidate them for money and essentially doom everything they've been working towards.

Clearlake would be backers. While they probably would demand tighter control of finances their bid winning would mean THQ could continue being THQ. Ubisoft are bad for games, apart from one IP they have run into the ground (and wasn't that interesting to begin with) they have done nothing but run down IP at a spectacular rate. I of course have not played FC3 yet but it may be their last gasp as they focus of more F2P games.

All these THQ articles make me so sad, like watching an old friend laying in a hospital bed, slowly withering away.

THQ is going to end-up like a roast beef.

The Rogue Wolf:
To be fair, in this sort of proceeding, thirty days actually is pretty short, and I suppose the debtholders- aside from wanting to get the maximum price they can- are worried that it's basically an inside job of sorts.

Nah its unsecured creditors trying to leverage some cash out of the deal. If unsecured creditors delay the deal too much and the business gets broken up, they won't get any money out the deal. All the money goes to the secured creditors first and the rest will be lucky if they get 1 cent on a dollar debt.

I don't want themmtombe bought by EA

Sounds an awful lot like something headting to bankruptcy fraud the way those conditions are set like that. No wonder the debtors object to it.

There's explicit laws against bankrupting a company and selling all their assets to one of your mates (or yourself, even) for cheap (which is the most often occuring form of bankruptcy fraud), so I give the debtors good odds of winning that.

Probably the best that can happen is if the IP's stay with the teams that developed them. THQ has done right by all the series they've worked on. It would be a shame to see Saint's Row or Warhammer handed to some group that makes a quick and crappy cash in on the title's popularity.

Eddie451:
All these THQ articles make me so sad, like watching an old friend laying in a hospital bed, slowly withering away.

...surrounded by people arguing over who gets the inheritance.

metro, warhammer, company of heroes :(

THQ i'll miss you :(

as a THQIQ investor, I'm hoping Clearlake gets them. If they get broken up, it'll be worthless for me lol.

i hope no one preordered all those games that are due for release this year

This is just standard procedure. THQ declares their point, others fight over it... this is not really news worthy. It's like when any business declares bankruptcy, the unsecured creditors (in the case where there are unsecured creditors) always get the short end of the stick as they are last in line for payback. They are arguing, as is there right, that if THQ does not give enough time for maximum sale then they face not being paid back. Secured creditors are protected by assets where unsecured creditors are paid in profits (after everything else is taken care of). Standard operating procedure, nothing to see here. We all knew squabbling was going to happen.

THQ sounds hell bent on Clearlake if they limited the interested parties' time to 30 days. Seems like they cut some side deal right away or something.

wombat_of_war:
i hope no one preordered all those games that are due for release this year

I actually pre-ordered South Park, but from what I'm told, they still plan to release games. It's not the type of bankruptcy that shuts their doors completely.

Mortis Nuncius:
I certainly hope Ubisoft's bid in this still stands. At least the assets would be landing in the hands of people familiar and successful in the gaming industry (potentially ensuring all of THQ's current projects stay their course) rather than be sold to a company who'd rather liquidate them for money and essentially doom everything they've been working towards.

Fark no, the game industry is already focusing on the less interesting aspects of Warhammer 40K because SPHEZ MEHRINZ R KOOL YO, you hand that over to Ubisoft and we won't even see token gestures to the rest of the fanbase, it's just be endless sequels to Space Marine for the next decade.

Magichead:

Mortis Nuncius:
I certainly hope Ubisoft's bid in this still stands. At least the assets would be landing in the hands of people familiar and successful in the gaming industry (potentially ensuring all of THQ's current projects stay their course) rather than be sold to a company who'd rather liquidate them for money and essentially doom everything they've been working towards.

Fark no, the game industry is already focusing on the less interesting aspects of Warhammer 40K because SPHEZ MEHRINZ R KOOL YO, you hand that over to Ubisoft and we won't even see token gestures to the rest of the fanbase, it's just be endless sequels to Space Marine for the next decade.

Whether you like Ubisoft or not you can not deny that of the three big publishers they are the biggest innovators. They even change the heck of existing franchises like Far Cry and Assassins Creed. Ubisoft has proven they are willing to innovate and even if I hate Uplay I will continue to support their practices over those of EAs and Activisions.

Rich people upset that they couldn't slice THQ up like so much pie. Although I'd be weary of any company with "Capital" in their name, I.E. Bane Capital, Capital One, I suspect THQ liked the offer they were given so weren't expecting it to be matched to buy the entire company. Still, selling the company to a credit firm and not another publisher is a bad idea if you ask me.

The Rogue Wolf:
To be fair, in this sort of proceeding, thirty days actually is pretty short, and I suppose the debtholders- aside from wanting to get the maximum price they can- are worried that it's basically an inside job of sorts.

thats because it is. it was clear form day 1 they want a certain 1 company to take over and allow other bidders jsut because its the law.

Magichead:

Mortis Nuncius:
I certainly hope Ubisoft's bid in this still stands. At least the assets would be landing in the hands of people familiar and successful in the gaming industry (potentially ensuring all of THQ's current projects stay their course) rather than be sold to a company who'd rather liquidate them for money and essentially doom everything they've been working towards.

Fark no, the game industry is already focusing on the less interesting aspects of Warhammer 40K because SPHEZ MEHRINZ R KOOL YO, you hand that over to Ubisoft and we won't even see token gestures to the rest of the fanbase, it's just be endless sequels to Space Marine for the next decade.

The thing is though, W40k is a niche, space marine sequels will hardly be major cashcows. If they don't make them for the people that will actual buy the games, then GW will take their business elsewhere.

MrPeanut:

Magichead:

Mortis Nuncius:
I certainly hope Ubisoft's bid in this still stands. At least the assets would be landing in the hands of people familiar and successful in the gaming industry (potentially ensuring all of THQ's current projects stay their course) rather than be sold to a company who'd rather liquidate them for money and essentially doom everything they've been working towards.

Fark no, the game industry is already focusing on the less interesting aspects of Warhammer 40K because SPHEZ MEHRINZ R KOOL YO, you hand that over to Ubisoft and we won't even see token gestures to the rest of the fanbase, it's just be endless sequels to Space Marine for the next decade.

The thing is though, W40k is a niche, space marine sequels will hardly be major cashcows. If they don't make them for the people that will actual buy the games, then GW will take their business elsewhere.

Come on, a lots of people like ork! And even more like elves! And then you put them in space! Space elf and space orks with SPACE MAGIC! Who wouldn't buy that? :D

Mortis Nuncius:
I certainly hope Ubisoft's bid in this still stands. At least the assets would be landing in the hands of people familiar and successful in the gaming industry (potentially ensuring all of THQ's current projects stay their course) rather than be sold to a company who'd rather liquidate them for money and essentially doom everything they've been working towards.

I certainly hope not. From the info so far it seem that Clearlake Capital Group would leave THQ mostly "as is" and let them do their stuff. Ubisoft is notorious for hating PC gamers and since I love my THQ games on my PC I don't really want them under Ubi control. But, opinions, so we'll most likely agree to disagree.

 

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