Bloomberg News

THQ Inc. Files for Bankruptcy Month After CFO Quit

December 19, 2012

THQ Inc. (THQI:US), the money-losing video- game maker, filed for bankruptcy protection and plans to sell most of its assets to affiliates of Clearlake Capital Group LP.

The company listed assets $204.8 million and debt of $248.1 million as of Dec. 17 in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. Chapter 11 is the section of the U.S. Bankruptcy Code used by companies seeking to reorganize. Affiliates THQ Digital Studios Phoenix, THQ Wireless, Volition and Vigil Games also sought protection.

“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,” THQ said in a statement today. The proposed deal is subject to court approval, as well as better offers.

Clearlake, which has agreed to be the lead bidder at a court-supervised auction, offered a total of about $60 million, including a new $10 million note. Assets include the company’s four studios and its games in development, according to the statement.

THQ publishes game franchises including “Saints Row,” “Company of Heroes,” “Darksiders” and “Red Faction,” according to its website. “Saints Row,” with more than 11 million units shipped globally, is THQ’s most-successful owned- IP franchise, according to a May 2012 press release.

‘Saints Row’

In “Saints Row,” an open-world action-adventure game that lets the player have free roam of the virtual world to play the story and explore the world how they choose, players take on the persona of a gang member to take on rival gangs and end violence in the made-up city of Stilwater. “Saints Row” was followed by two more sequels and a third, “Saints Row 4,” is in development.

The company also makes wrestling games based on World Wrestling (WWE:US) Entertainment as well as games based on characters from Disney and Nickelodeon including SpongeBob Squarepants and Disney’s Princesses.

The video-game maker required more time for some of its upcoming titles and had to delay the March introductions of “South Park: The Stick of Truth,” based on the popular adult cartoon show from Matt Stone and Trey Parker, “Company of Heroes 2” and “Metro: Last Light.”

‘Expedited Sale’

“Absent an expedited sale, the value of the debtors as a going-concern will be jeopardized because the debtors will not have sufficient liquidity to continue operating pending any sale,” Brian Farrell, THQ chief executive officer, said in court papers. The company is seeking to complete the sales process in about 30 days.

The company plans to borrow as much as $37.5 million from Wells Fargo & Co. (WFC:US) and Clearlake to help fund operations during the sales process, according to court papers. The company said its business won’t be interrupted and obligations to customers and workers will be fulfilled. The company’s foreign operations, including Canada, aren’t included in the filing.

THQ’s largest unsecured creditors listed in court papers include holders of $102 million in 5 percent debentures due in 2014, under trustee Wilmington Trust NA; World Wrestling Entertainment Inc., owed $45 million; Yuke’s Co. (4334), owed $17.8 million; Mattel Inc. (MAT:US), owed $12.8 million; and Viacom International Inc., owed $10 million.

Shares of the Agoura Hills, California-based company fell the most in 12 years on Nov. 6 after THQ posted a second-quarter loss (THQI:US) and announced that it had hired Centerview Partners LLC to evaluate its options and raise cash. THQ tumbled 50 percent to $1.50 on that day.

THQ declined 12 percent to $1.22 today before trading (THQI:US) was halted. They had fallen 82 percent this year before today.

Paul J. Pucino, who was chief financial officer for four years, resigned as of Nov. 21.

The case is In re THQ Inc., 12-13398, U.S. Bankruptcy Court, District of Delaware (Wilmington.)

To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net; Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net

To contact the editors responsible for this story: Glenn Holdcraft at gholdcraft@bloomberg.net; John Pickering at jpickering@bloomberg.net


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