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THQ files Chapter 11 Bankruptcy, Clearlake enters w/ purchase agreement [OP Update 2]


Jun 22, 2010
Mod Edit:

What does this mean?

Well, there are two primary options.

1.) Clearlake is buying THQ with the intention of running them as a normal publisher. THQ was not a profitable entity, so this might be incredibly unlikely. It's not entirely impossible however.

2.) Clearlake is buying THQ with the intention of selling off their assets at a later date. By funding THQ until they get through bankruptcy court, THQ's debt is removed, allowing the assets (or the company as a whole) to be sold off without having their studios shut down and have key staff leave. This means that their IPs and studios are more valuable than they would be otherwise, and that Clearlake got to buy them at a relatively cheap price since the $100+ million in debt that got added on to the cost is no longer there, thus meaning any asset sales would likely net a profit.

Note: Technically there is a 30 day window in which other companies can outbid Clearlake and buy THQ.

One of our resident financial experts who actually follows the company weighs in:

It is impossible, there is no way that Clearlake keep hold of THQ, it's just not their business model.

The two options are:

1. Clearlake load up the new subsidiary, THQ, with preferential debt and sell them as a whole company to the highest bidder.

2. Clearlake break up the company and sell the assets one by one after signing sweetheart deals with key talent.

Of these two, the second option is the most likely.

They also have sales predictions in the bankruptcy filing.

Development budget


Just hit the news wire.

Edit: for those asking for a source, its from my trading news desk. Subscription based so can't link it. You can check the stock being halted though, this is the reason why.

Edit 2:

Barrons said:
Shares of video game maker THQ (THQI) have been halted pending a news announcement. The stock had been down 16 cents, or almost 12%, at $1.22 before the halt.

Update: THQ announced it has filed for bankruptcy, according to wire service headlines just now out.

Edit 3:

Chapter 11, Clearlake may be acquiring assets:

Yahoo said:

THQ Inc. (THQI), a leading worldwide developer and publisher of interactive entertainment software, today announced that it entered into an Asset Purchase Agreement with a “stalking horse bidder,” affiliates of Clearlake Capital Group, L.P., 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 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 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.

“The sale and filing are necessary next steps to complete THQ’s transformation and position the company for the future, as we remain confident in our existing pipeline of games, the strength of our studios and THQ’s deep bench of talent,” said Brian Farrell, Chairman and CEO of THQ. “We are grateful to our outstanding team of employees, partners and suppliers who have worked with us through this transition. We are pleased to have attracted a strong financial partner for our business, and we hope to complete the sale swiftly to make the process as seamless as possible.”

According to Jason Rubin, who joined THQ as President last May, “We have incredible, creative talent here at THQ. We look forward to partnering with experienced investors for a new start as we will continue to use our intellectual property assets to develop high-quality core games, create new franchise titles, and drive demand through both traditional and digital channels.”

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.

As is the case after a Chapter 11 filing, THQ expects to receive notice from NASDAQ informing the company that its shares will be delisted from the exchange within nine calendar days of notification.

THQ is being advised by Centerview Partners LLC and FTI Consulting as its financial advisors and Gibson, Dunn & Crutcher as legal counsel. Clearlake is being advised by DLA Piper as legal counsel.

For additional information about THQ, please visit www.thq.com. For information regarding the Chapter 11 case, please visit www.kccllc.net/thq.

About THQ

THQ Inc. is a leading worldwide developer and publisher of interactive entertainment software. The company develops its products for all popular game systems, personal computers, wireless devices and the Internet. Headquartered in Los Angeles County, California, THQ sells product through its network of offices located throughout North America and Europe. More information about THQ and its products may be found at http://www.thq.com.

About Clearlake Capital Group

Clearlake Capital Group, L.P. is a private investment firm focused on special situations and private equity investments such as corporate divestitures, recapitalizations, buyouts, reorganizations, turnarounds and other equity investments. Clearlake seeks to partner with world-class management teams by providing patient, long-term capital and operational expertise to invest in dynamic businesses. Clearlake currently manages approximately $1.4 billion of equity capital, and Clearlake’s founding principals have led over 50 investments totaling more than $2.7 billion of capital in sectors including business services, communication, consumer products/retail, defense/public safety, energy/power, healthcare, industrials, media, and technology. For more information, please visit www.clearlakecapital.com.

THQ Inc. Caution Concerning Forward-Looking Statements

This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries (collectively referred to as "THQ"), including, but not limited to, expectations regarding the agreement with Clearlake and the bankruptcy case. These statements are based upon management's current beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, the adverse impact of the bankruptcy case on THQ’s business, financial condition and results of operations, including its ability to maintain customer and supplier relationships, THQ’s ability to obtain bankruptcy court approval in connection with the bankruptcy case, the actions of THQ’s creditors and other third parties with interests in the bankruptcy case, competitive, economic, legal, political, and technological factors affecting our industry, operations, markets, products, or pricing. Readers should carefully review the risk factors and the information that could materially affect THQ's financial results, described in other documents that THQ files from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal period ended March 31, 2012 and subsequent Quarterly Reports on Form 10-Q, and particularly the discussion of trends and risk factors set forth therein. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties or to revise or publicly release the results of any revision to these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
Source: http://finance.yahoo.com/news/thq-inc-secures-asset-purchase-185300188.html


butthurt Heat fan
May 1, 2007
Outside Katy Perry's house
So, who's going to buy the IP catalog now? I hope it's WB Games, their purchase of the Midway Games IP catalog went well and they made back the money spent on it just off of sales of the latest Mortal Kombat game, so they must feel confident.
Jan 12, 2007
Toronto, ON. Canada
What does it mean?

If I am correct, Bankruptcy Protection is filed to stop harassing contacts from creditors, and ensures all the debt is paid off smoothly. Once all the assets are sold and distributed, the protection is removed.


Bankruptcy Protection:

Automatic Stay
The term "bankruptcy protection" refers to the automatic stay put in place when you file bankruptcy.

Collection Activity
Bankruptcy protection stops all collection activity from creditors, such as harassing phone calls and letters.

Repossessions and Foreclosure
The automatic stay also stops repossessions and foreclosure proceedings on your secured property.

Bankruptcy Protection Ends When the Case Ends
The protection of the automatic stay ceases when the case is successfully completed or is dismissed.

Monetary Award
If a creditor violates the bankruptcy protection, a debtor may be entitled to a monetary award. First, a demand letter is sent to the creditor explaining the violation, and then an adversary proceeding may be filed.

TL;DR: They've declared bankruptcy. Assets will be sold to other companies, and if there are no buyers then assets will be dissolved.


Jan 28, 2008
As long as South Park is OK.

This. I'm not too attached to any other franchises (outside of Relic at least, but I'm sure they'll be fine).

I don't want to sound like an asshole, they just don't have a portfolio or history I have much fondness for. But yeah, really this South Park title is a game that has to happen.

Metro is looking mighty impressive too - but almost out of the door, right?


Jul 17, 2009
Well there goes my hopes of Homeworld 3.
What happens to Relic, are they independent from THQ or do they get sold off?


Mar 20, 2012
Shit. Well, seems like they at least tried in the last month or two to get their final games locked into release and pay their employees, they tried. Thou shalt be (somewhat) missed.


Mar 19, 2009
Toronto, Canada
Which chapter did they file for? Chapter 7 is a "We don't think there's a way to save the company, assets will be liquidated", where as Chapter 11 is "There's a chance we can make this work".


May 1, 2012
Judging by their games, they seemed pretty hands off in the development process as a publisher. That's just the impression I get though since I view the majority of their stuff as hyper-polished ~indie~ games (games with one noteworthy design element).


May 9, 2011
Would anyone buy the entirety or will it be carved up and sold?

I don't think anyone's crazy enough to buy all of them and the crazy debt they have. People will bid for Saints Row, South Park and probably a few other things.