THQ filing for bankruptcy

[C2B]

http://www.neogaf.co...ad.php?t=504815

 

 

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.

 

http://finance.yahoo...-185300188.html

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.

Edited December 19, 2012 by C2B

[Hassat Hunter]

Well, let's hope another publisher will take over South Park.

 

So close to completion, so much interest, so much potential profit... there has to be one...

 

EDIT: I apparently fail reading. So they're taken over and progress as before? What? How is that bankrupt?

Edited December 19, 2012 by Hassat Hunter

[C2B]

EDIT: I apparently fail reading. So they're taken over and progress as before? What? How is that bankrupt?

 

Well, who's to say that investor won't sell the bits off for profit? THQ itself is bankrupt.

[LadyCrimson]

Bankruptcy laws in the US....ah well, this kinda sucks. I'm not educated on this sort of thing, but often feels like these kind of deals can be iffy long term (for the sellers claiming things will be "ok," I mean), but I hope the buyer in short term, at least, leaves well enough alone and won't meddle with South Park release or Obsidian's development of it etc. :/

[Enoch]

There are basically 2 kinds of business bankruptcy in the U.S. The first, "Chapter 7" (named for the chapter of Title 11 of the United States Code that contains the pertinent laws), is a straight-up liquidation: Sell everything the company owns and give the proceeds to its creditors, in a designated (and often hotly contested) order of priority.

 

THQ's filing is not one of those. Rather, this kind of business bankruptcy is "Chapter 11," which allows the business to go on operating, while drastic changes in ownership and debt liabilities go on in the background. Many creditors' claims (i.e., debts the company owes) are greatly reduced, converted to equity (ownership interests), or wiped out, as dictated in the rules and negotiated by all the interested parties, under supervision of the Court. The power struggle in big chapter 11s is complicated-- usually the people running the company are allowed to stay on and keep things running ("debtor-in-possession"), but the people who owned the company before the "reorganization" usually end up owning only part of the post-bankruptcy company. And, sometimes, the whole thing ends up getting sold to an outside party, which is what this "Clearlake" is apparently trying to accomplish.

 

If these things are well-planned, and most of the interested parties have agreed to how everything will work in advance of the filing, it is not unheard of for the whole process to be wrapped up in a few weeks.

 

As for SP:tSoT, the post-bankruptcy company (which is technically a new business entity) will have the opportunity to either assume or repudiate contracts to which the pre-bankruptcy company agreed. This would include the development deal with Obsidian and the South Park folks. In this case, though, a game that is so close to completion is almost certainly a valued asset to new-THQ, so I'd be shocked if everybody involved didn't want the company to keep moving ahead with the project.

Edited December 19, 2012 by Enoch

[Orogun01]

In case that the new publisher decides not to take the contract, does anyone knows if they can take the game to another publisher?

[Hormalakh]

Obsidian has already been paid for their work though right? I mean if they don't distribute the game, it's not like Obsidian will be forced to pay back the money, will it? How would this effect Obsidian?

[Enoch]

In case that the new publisher decides not to take the contract, does anyone knows if they can take the game to another publisher?

Depends on the details. Obsidz would be absolved of any further obligations under the contract, but that doesn't necessarily govern the ownership of the work produced to-date. If it's the property of old-THQ, then it is an asset that the new company can sell, use, or stick in a drawer if it wants to.

 

Obsidian has already been paid for their work though right? I mean if they don't distribute the game, it's not like Obsidian will be forced to pay back the money, will it? How would this effect Obsidian?

Again, the devil is in the details, such as the timing of the payments from THQ to Obsidian. If THQ owed Obsidz some cash at the time that the bankruptcy was filed, they'd be on line for that money with all the other people who lent THQ money and may get less than 100% of their claim.

 

 

That said, Obsidian is probably viewed as an important partner for the successor company, given that the revenue potential of tSoT will likely be very important in the company's getting through the next few months. So it seems likely that the Power That Be in THQ and Clearlake would have reached out to Obsidian's legal and financial folks as they planned the Bankruptcy filing.

Edited December 20, 2012 by Enoch

[Hassat Hunter]

"Chapter 11," which allows the business to go on operating, while drastic changes in ownership and debt liabilities go on in the background. Many creditors' claims (i.e., debts the company owes) are greatly reduced, converted to equity (ownership interests), or wiped out, as dictated in the rules and negotiated by all the interested parties, under supervision of the Court. The power struggle in big chapter 11s is complicated-- usually the people running the company are allowed to stay on and keep things running ("debtor-in-possession"), but the people who owned the company before the "reorganization" usually end up owning only part of the post-bankruptcy company. And, sometimes, the whole thing ends up getting sold to an outside party, which is what this "Clearlake" is apparently trying to accomplish.

So... a good way to just get rid of your debt without paying it back. Or is the Court specifcially to prevent that from happening.

Sounds kinda like fraud to me honestly.

[Enoch]

"Chapter 11," which allows the business to go on operating, while drastic changes in ownership and debt liabilities go on in the background. Many creditors' claims (i.e., debts the company owes) are greatly reduced, converted to equity (ownership interests), or wiped out, as dictated in the rules and negotiated by all the interested parties, under supervision of the Court. The power struggle in big chapter 11s is complicated-- usually the people running the company are allowed to stay on and keep things running ("debtor-in-possession"), but the people who owned the company before the "reorganization" usually end up owning only part of the post-bankruptcy company. And, sometimes, the whole thing ends up getting sold to an outside party, which is what this "Clearlake" is apparently trying to accomplish.

So... a good way to just get rid of your debt without paying it back. Or is the Court specifcially to prevent that from happening.

Sounds kinda like fraud to me honestly.

Well, the Court, and the various provisions that give the jilted creditors voting rights on the reorganization plan. What often ends up happening is an equity-for-debt swap-- the company doesn't have money to pay its debts, so instead they give their most important creditors an ownership interest in the company. So, you get rid of your debt, but also suddenly see your ownership interest (and share of any future profits) shrink from 50% of the company to 10%.

[Orogun01]

In case that the new publisher decides not to take the contract, does anyone knows if they can take the game to another publisher?

Depends on the details. Obsidz would be absolved of any further obligations under the contract, but that doesn't necessarily govern the ownership of the work produced to-date. If it's the property of old-THQ, then it is an asset that the new company can sell, use, or stick in a drawer if it wants to.

IIRC, Viacom was also financing this through the South Park Studios. The specifics of the contract are up for speculation but if THQ only had the rights to distribution, can they just find another publisher?

[WorstUsernameEver]

Can't say I'm surprised though the timing (just before Christmas) caught me a bit off guard. Jason Rubin has a message on this all by the way, and it looks like, at least for the moment, they're moving forward with the development of all games including South Park.

 

EDIT: Also, I can't find the source right now, but apparently some documents included the sales expectations for the titles, and THQ is expecting South Park to sell 3 million copies? That sounds way too much to me, to be honest.

Edited December 20, 2012 by WorstUsernameEver

[mrmud]

Michel pactor made a top of the head estimation on todays joystiq podcast where he estimated three mil each for sp and the next saints row

[pseudonymous]

Michel pactor made a top of the head estimation on todays joystiq podcast where he estimated three mil each for sp and the next saints row

 

That seems like a low estimate, to be honest. South Park has appeal to a large, existing audience and the only people that don't want to play Saints Row are members of al Qaeda.

[Awpknivez]

So is this really the end of THQ?

[SimonM]

EDIT: I apparently fail reading. So they're taken over and progress as before? What? How is that bankrupt?

 

That's what I thought. Like the article mentions, it just looks like a way for them to legally get out of certain contractual obligations.

 

I don't think there's any need for concern about South Park or any of the other games in development.

Edited December 24, 2012 by SimonM

[redneckdevil]

Well now they are selling off title by title......

I dont know what to expect now of the game. Will someone come along scoop it up and decide to change it or leave it on backburner or etc etc wtc?

Dangit im really looking forward to this game, cant wait for it to come out already.

[Awpknivez]

I just hope it successfully comes out and it comes out good. After playing that failure called "Halo 4", I think I'm lowering my expectations.

[redneckdevil]

Ow God, EA is stepping in to buy some titles! I have a bad feeling about sp:sot. Please tell me its basically finished so that ea cant force a multiplayer mode in it and please tell me its not ending in a cliff hanger.

First time ever im excited about a southpark game and now im worried as hell.

[C2B]

Ow God, EA is stepping in to buy some titles! I have a bad feeling about sp:sot. Please tell me its basically finished so that ea cant force a multiplayer mode in it and please tell me its not ending in a cliff hanger.

First time ever im excited about a southpark game and now im worried as hell.

 

I think Viacom would have to agree first.

[Labadal]

I hope Viacom actually steps up and backs the project to the end. (I think they will.)

[redneckdevil]

Is Viacom the owner and thq just the person who distributes?

[TSBasilisk]

Viacom owns the South Park IP and issued the licensing rights to the game. THQ is the publisher, with permission to publish and distribute the game produced. The exact details of their relationship and how Obsidian ties in are part of a confidential contract.

 

On the bright side, a game this near completion is a good investment and should avoid falling into the bankruptcy limbo. With most of the work done, whoever gets it will pay relatively little for immediate publishing rights.