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Judge Denies THQ Bankruptcy Sale - UPDATED

| 7 Jan 2013 19:47
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Roughly ten parties including Warner Bros. have come forward to express interest in the bankrupt publisher.

A U.S. Bankruptcy Judge has ruled in favor of opponents to THQ's fast-paced bankruptcy sale, including lenders and the trustee overseeing the process, who complained last week that the company was moving ahead too quickly with the sale and trying too hard to keep it intact, possibly to the detriment of investors. Judge Mary Walrath agreed, pointing out that THQ didn't even publicly announce that it was for sale until potential buyers had signed non-disclosure agreements.

Significant levels of interest have since been expressed in the company and its properties, which Walrath said demonstrates that the process has thus far been inadequate. Among those interested is Warner Bros., which acquired Midway in 2009 for $33 million in a deal that spelled the end of the Mortal Kombat studio. That's a fate THQ is trying to avoid, and also one of the central complaints of the bankruptcy opponents, who said the proposed bankruptcy process is designed to "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 creditors."

"I am not convinced that we are under the gun to have a sale process by the 15th," Walrath said. Another hearing is scheduled to take place today and in the meantime, she added, "I think the parties need to talk."

THQ reported assets of $204.8 million and debt of $248.1 million in its bankruptcy filing, made December 19, 2012.

UPDATE: According to the Distressed Debt Investing Twitter feed, the THQ auction has been delayed to January 22 in order to allow interested parties more time to get involved. More significantly, the auction will allow THQ to be sold off piecemeal, meaning that companies will be able to bid on and acquire individual IPs and studios. Electronic Arts is reportedly interested in some properties and has completed "site visits" related to them. It remains possible that THQ could be purchased as a whole, but it seems far more likely at this point that its days are very nearly over.

Source: Business Week

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