Video Game Publisher THQ Fills for Bankruptcy: New Beginning for the Company

President of THQ Sees Bankruptcy as New Beginning

by Anton Shilov
12/20/2012 | 11:42 PM

THQ, a leading developer and publisher of video games, this week announced that it entered into an asset purchase agreement with affiliates of Clearlake Capital Group, to acquire substantially all of the assets of THQ’s operating business, including THQ’s four owned studios and games in development. The sale will allow THQ to shed certain legacy obligations and emerge with the strong financial backing of a new owner with substantial experience in software and technology.

 

To facilitate the sale, THQ and its domestic business units have filed voluntary petitions under Chapter 11 of the U.S. bankruptcy court for the district of delaware. The company’s foreign operations, including Canada, are not included in the filings. The company has obtained commitments from Wells Fargo and Clearlake for debtor-in possession (DIP) financing of approximately $37.5 million, subject to court approval.

THQ will continue operating its business without interruption during the sale period, subject to court approval of THQ’s first-day motions. All of the company’s studios – Relic, THQ Montreal, Vigil and Volition – remain open, and all development teams continue. The company remains confident in its existing pipeline of games. THQ maintains relationships with some of the top independent development studios, such as Crytek, South Park Digital Studios, 4A games, Obsidian, and Turtle Rock, around the globe. As part of the sale, the company is seeking approval to assume the contracts of these studios, and Clearlake will assume these contracts.

“Clearlake is providing the company the money it needs to keep working on the products as the process plays itself out. Importantly, when the purchase is complete, Clearlake has committed to invest additional ample capital to let us finish the games we are making and continue making games going forward. In short, they are investing in a new start for our company,” said Jason Rubin, the president of THQ.

Clearlake has agreed to serve as the “stalking horse bidder” for a Section 363 sale process, which allows other interested parties to come forward with competing bids. Aggregate consideration offered by Clearlake for the purchase totals approximately $60 million, including a new $10 million note for the benefit of the company's creditors. The company is asking the court for a schedule to complete the sale process in about 30 days.

Consumers and retailers should see no changes while the company completes a sale. The new financing will support business operations throughout the period. THQ does not intend to reduce its workforce as a result of the filing, and employees will continue to work their usual schedules and receive normal compensation and benefits, pending customary court approval.