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THQ's bankruptcy sale details: Auction on January 22nd, Will Allow Piecemeal Purchase

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Update 5:

Distressed Debt said:
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.
Source: http://www.distressed-debt-investing.com/2013/01/distressed-debt-thq-bankruptcy-update.html

Update 4:

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

https://twitter.com/DDInvesting/status/288376488573673472
Update 3:

http://www.businessweek.com/news/2013-01-04/thq-denied-approval-of-bankruptcy-sale-process-and-loan

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.

Distressed Debt said:
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.
Source: http://www.distressed-debt-investing.com/2013/01/thqi-reconvening-on-monday-more-coming.html

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.

Update:

Nirolak said:
There a few more details on his Twitter account. If I understand things correctly, Warner might be interested in buying THQ?

https://twitter.com/DDInvesting
Yeah, "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 may be other parties interested as well that didn't testify, since they may have been interested in a piecemeal bid.
Nirolak said:
Twitter said:
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.
Five 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.
 

El Pescado

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What does this mean for my WWE '13 DLC due Tuesday?

More importantly, can we buy the WWE license and give it to Syn Sophia?
 

LumpOfCole

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For the Stick of Truth developers, is it feeling like Majora's Mask Day 3 for them? I can't imagine working under the stress that everything might go poof in two weeks.
 

dsister44

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It's sad to see my favorite publisher having so much trouble. Why must the good companies die so young? :'(
 
For the Stick of Truth developers, is it feeling like Majora's Mask Day 3 for them? I can't imagine working under the stress that everything might go poof in two weeks.
Well at least Viacom has the money to self fund the rest of the project if they want.

People who are owned by THQ or have contracts with them (Crytek, Turtle Rock) are probably more pressured.
 

BD1

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I wonder who the two opposing groups are?

My guess would be WWE and other unsecured creditors.
 

Derrick01

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For the Stick of Truth developers, is it feeling like Majora's Mask Day 3 for them? I can't imagine working under the stress that everything might go poof in two weeks.
Well to be fair, if anyone in this industry is more prepared for a situation like that it's Obsidian :lol
 

BD1

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Poor THQ can't catch a break.
You've got to remember, THQ's mismanagement has screwed ALOT of reputable partners out of lots of money. Those creditors are going to lose millions of dollars, regardless of the outcome.

THQ does not deserve sympathy.
 

Tzeentch

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Not seeing the problem here. THQ has a responsibility to their creditors, which they tried to bypass by engineering a sweetheart deal. Their studios should be outraged that THQ is mismanaged right to the very end.
 

MrDaravon

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You've got to remember, THQ's mismanagement has screwed ALOT of reputable partners out of lots of money. Those creditors are going to lose millions of dollars, regardless of the outcome.

THQ does not deserve sympathy.
Yup. Not surprised that they didn't approve this deal, it clearly was favoring Clearlake and was not the best possible plan for maximizing recoverable funds for the people who are owed probably quite a lot of money. The average people and teams and THQ deserve sympathy, but their management does not.
 

Coolwhip

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You've got to remember, THQ's mismanagement has screwed ALOT of reputable partners out of lots of money. Those creditors are going to lose millions of dollars, regardless of the outcome.

THQ does not deserve sympathy.
Idd, the sympathy is misplaced.
 
There a few more details on his Twitter account. If I understand things correctly, Warner might be interested in buying THQ?

https://twitter.com/DDInvesting
Yeah, "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 may be other parties interested as well that didn't testify, since they may have been interested in a piecemeal bid.
 

AHA-Lambda

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Warner definitely seem the best suited of the publishers to buy THQ.

Other nominees? I'd say:
Square Enix
Ubisoft
EA
Bethesda? I could see them being interested in something like Darksiders or in a studio like Relic.
 

RPGCrazied

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Stay safe South Park! Almost there! I really want this game to release, I'll be so pissed if not. This could be the first epic South Park game to ever come out.
 

Yawnier

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Looking at the Twitter more, five companies are performing evaluations on whether to buy parts of the company.
What are the chances that those 5 companies are video game publishers akin to Warner Bros Interactive?
 
What are the chances that those 5 companies are video game publishers akin to Warner Bros Interactive?
One of them is definitely Warner Bros as they had lawyers at the trial testifying against THQ's bankruptcy being approved.

The other four, since Centerview said they were trying to buy individual assets, are very likely video game publishers.

I'm very willing to say two of them are EA and Ubisoft.

If I had to guess at the others, Square Enix and Take-Two.
 

Exodus

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I kind of can't blame Clearlake on this, they agreed to shoulder the burden temporarily but they aren't going to just unload some of the burden and carry on with what people did not want. That's bullshit.

Needless to say we know that the 5 buyers are seeking to purchase the ones they want. Here's for hoping the best outcome happens to them.
 

markot

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I don't trust any pub. Ubi bought massive and turned them into a farm for their yearly shit.
 

Modedude

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What is more worrying is that if it's all taken to those buyers, they may just want the IPs and then let go of the employees. Don't be quick to forget the people involved.
 
What is more worrying is that if it's all taken to those buyers, they may just want the IPs and then let go of the employees. Don't be quick to forget the people involved.
The publishers I mention have a history of actually keeping the developers they buy.

Netherrealm is still running, so are DICE and BioWare, so is Eidos, as is almost every purchase by Take-Two over the years.

Ubisoft doesn't buy a lot, but Massive is still going after being picked up.
 

Corto

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What is more worrying is that if it's all taken to those buyers, they may just want the IPs and then let go of the employees. Don't be quick to forget the people involved.
And the employees can also leave by themselves after a buyout. Relic, Vigil and Volition will be logos.


The publishers I mention have a history of actually keeping the developers they buy.

Netherrealm is still running, so are DICE and BioWare, so is Eidos, as is almost every purchase by Take-Two over the years.

Ubisoft doesn't buy a lot, but Massive is still going after being picked up.
That's actually reassuring. Thanks Nirolak!
 

duckroll

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What is more worrying is that if it's all taken to those buyers, they may just want the IPs and then let go of the employees. Don't be quick to forget the people involved.
I think what people need to consider is that it is looking more and more apparent that THQ management has been illegally sabotaging their own company in an attempt to wipe their debt, screw their creditors, and continue to keep their jobs with a new owner which is personally linked to their new president. It's really dodgy shit, which is why they're getting in trouble with it now, and it has nothing to do with the employees in the various studios who work hard making games.
 
I think what people need to consider is that it is looking more and more apparent that THQ management has been illegally sabotaging their own company in an attempt to wipe their debt, screw their creditors, and continue to keep their jobs with a new owner which is personally linked to their new president. It's really dodgy shit, which is why they're getting in trouble with it now, and it has nothing to do with the employees in the various studios who work hard making games.
Yeah, I mean, the opposition here is pretty straight forward.

Hunter ‏@DDInvesting
THQ Creditor Committee Named: Wilmington Trust, WWE, Silverback Asset Management, Mattel, and Viacom

Hunter ‏@DDInvesting
THQI Hearing: Original projections from just 2 weeks ago of -$10M of cash flow. Actual net cash flows actually positive of $3.4M.

Hunter ‏@DDInvesting
THQ: Lawyers for Warner Brothers states they have team ready to complete due diligence if more time is allowed.

Hunter ‏@DDInvesting
TQHI court heating up. Centerview's banker on record of saying buyers are interested in individual titles. Clearlake has said not allowed.

Hunter ‏@DDInvesting
THQI: Judge doesn't approve bid procedures. Not approving DIP. Recommencing Monday.

Basically everyone they work with is opposing them (including Viacom of South park and the WWE), and they have five known bidders who don't have the time to actually bid with Clearlake also trying to stop them.

The judge also refused even basic funding to keep THQ operating, so that implies she thought it was quite suspicious.
 

Yawnier

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One of them is definitely Warner Bros as they had lawyers at the trial testifying against THQ's bankruptcy being approved.

The other four, since Centerview said they were trying to buy individual assets, are very likely video game publishers.

I'm very willing to say two of them are EA and Ubisoft.

If I had to guess at the others, Square Enix and Take-Two.
Okay, so it seems that this makes things more interesting then.

Thanks!
 

Man God

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EA has a longer term history of closing the shit out of developers after only a year or three.
 

Mxrz

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Warner picking up Saints Row IP would be a great thing, no?

How would something like the South Park game work? They just buy the publishing rights, or what?
 

Kai Dracon

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I think what people need to consider is that it is looking more and more apparent that THQ management has been illegally sabotaging their own company in an attempt to wipe their debt, screw their creditors, and continue to keep their jobs with a new owner which is personally linked to their new president. It's really dodgy shit, which is why they're getting in trouble with it now, and it has nothing to do with the employees in the various studios who work hard making games.
I haven't followed every stage of this. What have they been doing in layman's terms that would be considered illegal?
 

Traumahound

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I think what people need to consider is that it is looking more and more apparent that THQ management has been illegally sabotaging their own company in an attempt to wipe their debt, screw their creditors, and continue to keep their jobs with a new owner which is personally linked to their new president. It's really dodgy shit, which is why they're getting in trouble with it now, and it has nothing to do with the employees in the various studios who work hard making games.
Huh, Rubin always seemed like a stand-up guy. Pretty disappointing to hear.
 

duckroll

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I haven't followed every stage of this. What have they been doing in layman's terms that would be considered illegal?
What has come out in the last day or two is that the management could have been deliberately devaluing the company and sabotaging operations to make it seem much more dire than it is. This in turn allowed them to file for Chapter 11, and for their company to go on sale. The illegal part is that this entire scheme was engineered for one purpose: so Clearlake can buy THQ wholesale at as low a price as possible, and also be freed from any debt the company has. This will allow Clearlake to continue running the company as it is, and keeping all the current THQ management employed, while any debt they owed to creditors no longer exist.

Huh, Rubin always seemed like a stand-up guy. Pretty disappointing to hear.
Since the allegations are unproven, I wouldn't think it is a good idea to throw anyone under the bus just yet. It's just how things are looking, and something to consider.
 

Kai Dracon

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What has come out in the last day or two is that the management could have been deliberately devaluing the company and sabotaging operations to make it seem much more dire than it is. This in turn allowed them to file for Chapter 11, and for their company to go on sale. The illegal part is that this entire scheme was engineered for one purpose: so Clearlake can buy THQ wholesale at as low a price as possible, and also be freed from any debt the company has. This will allow Clearlake to continue running the company as it is, and keeping all the current THQ management employed, while any debt they owed to creditors no longer exist.
Oh.

Oh.

Those naughty people.
 
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