Originally Posted by Distressed Debt
After adjourning its first hearing today, THQ reconvened at 3:00PM and announced that a compromised was made among various parties. A form of order has yet to be presented but the general takeaways:
Bids are due 9am January 22nd
Auction will be held 3pm on January 22nd
Sale Hearing January 23rd at 9am
The auction will allow for bidders to bid on only certain assets (titles, studios, etc) in the auction
Other details from the hearing concerned the minimum overbid which was reduced as well as the extension of Clearlake Capital's DIP term loan to January 25th (as an over-advance line).
In the morning hearing, it was announced that Clearlake Capital's bid would remove the $10M 2% note they originally had offered in exchange for extending the auction deadline. One thing to note: It remains to be seen how much secured debt (and for that matter assumed liabilities) will there actually be on the auction date. It was noted in the hearing this morning the company has begun the "slow pay" its bills which would alleviate need for cash but in theory increased assumed liabilities to a purchaser. As has been noted in the hearing, Clearlake can pick and choose which liabilities its assuming, but their counsel did note that it would be a more concrete number (to determine overbids) at the auction.
Currently bonds are trading in the 15-16 context. I had heard from traders on Friday that bonds were difficult to find (the issue is only $100M) but some bonds have traded this morning.
For bondholders, the only recovery (under Clearlake's stalking horse bids) they were going to receive was the $10M promissory note which seems to have been pulled away. If any of the parties involved (so far EA, Warner Brothers have been named in court) bid for all or just some of the titles, there is a chance bond holders could see a recovery here. Exact bid procedures have yet to be filed so I do not have a good assessment on how bids will be evaluated.
For instance, what happens if two studios are purchased for an aggregate consideration more than Clearlake's bid but the remaining studios need to be wound down? That may actually drain resources from the estate for wind down expenses.
For what its worth, when I first saw Clearlake's bid I wanted to be an LP in their fund because they would make a fortune off their purchase price. Given the way cash flows will begin to pick up (and possibly roll in if they are successful, not to mention cash already overseas) at THQI after their two releases in the first half of this year, with which a lot of developmental costs have been already spent, the return to Clearlake would have been impressive.
A few questions remain: Where are the massive swings in potential unsecured liabilities (from the first day affidavit) from Europe arising from? No one has given me a good answer on that. Why hasn't bond holders (or strategics for that matter) stepped up with their own DIP?
As we get more answers, we will update readers, especially after new items hit the docket.
Confirmed bidders so far are EA, Warner, and presumably Clearlake.
Parties have come to agreement: THQI auction now on Jan 22nd. The auction will allow for piecemeal ("title by title") sales of THQ assets
So, Business Week had a bit more on the trial:
-The creditors are requesting that there be three more weeks in the bankruptcy bidding process, and that potential buyers be allowed to consider buying individual assets.
-The judge stated that the evidence showed that THQ's pre-announcement marketing was insufficient as 10 buyers came forth only after the announcement was made.
-The judge also said that there could be significant value in selling the assets individually, and that Clearlake's requirement of a bulk sale may suppress bids.
-The judge ended by noting that she wasn't convinced THQ actually needed to complete the sale by January 15th, because their funds and cash flow were better than they were claiming.
Given the relatively small requests creditors are making, I'm having trouble seeing a scenario where they don't get their wishes, especially after the judge seems to agree with their sentiments.
It seems THQ's first attempt at getting their Clearlake plan through bankruptcy court has not worked, and a new trial has been scheduled for Monday after THQ and the two groups with objections can conference about their differences.
Originally Posted by Distressed Debt
THQI Reconvening on Monday (more coming later)
After an very, very long hearing, Judge Mary Walrath, a personally favorite of mine, did not approved the DIP motion or bidding procedures motion in the THQ case. She instructed parties to discuss and work out their issues over the weekend and set a new hearing on Monday. I will be writing a more thorough post this weekend on the day's events.
For those wondering what DIP means, it's Debtor In Possession funding, which THQ was going to use to keep operating while their bankruptcy procedures went through. Since they currently lack that, this is probably why the next hearing is so soon.
Originally Posted by NirolakYeah, "due diligence" is the process of evaluating all of THQ's IPs/projects in development and deciding if you want to make a bid.
There a few more details on his Twitter account. If I understand things correctly, Warner might be interested in buying THQ?
There may be other parties interested as well that didn't testify, since they may have been interested in a piecemeal bid.
Originally Posted by NirolakFive companies are interested in evaluating THQ's assets for purchase, but Clearlake doesn't want to let them do it piecemeal. The judge doesn't seem too favorable to the sentiment.
Originally Posted by Twitter
Centerview: 5 strategic buyers in active due diligence in THQ.
TQHI court heating up. Centerview's banker on record of saying buyers are interested in individual titles. Clearlake has said not allowed.