THQ declared bankruptcy and announced plans to sell to the equity firm Clearlake Capital. It was a troubling development for the struggling publisher, but if the sale goes as planned, it will mean they could potentially continue to operate, without the need for staff cuts or game closures. Unfortunately, the sale may not go as planned.
Distressed Debt Investing
report that two objections have been filled in the case. The first, raised by the US Trustee overseeing the bankruptcy, is... complicated. Essentially her complaint is that the short timing of the sale and high reimbursement rate unfairly benefit Clearlake. The proposed sale hearing of January 10 and $2.25 million due to Clearlake if another company won the bid essentially block other interested parties from participating.
The second objection was raised by THQ's own creditors, and its motivations are far more obvious. Their problem with the sale is the way THQ management have arranged the terms to favour keeping jobs and ensuring the company's future over debt payments. Standard bankruptcy practice is to chop the company into little bits and sell each one piecemeal. THQ's terms ensure the company would be bought as a whole. Which sounds like a good thing, but it doesn't let the money-men maximise their profits, so obviously it must be bad.
"Taken as a whole, the bidding procedures are designed specifically to ensure that Clearlake is the successful bidder and that the Debtors' business will continue as a 'going concern,' whether or not such outcome would be in the best interests of the Debtors' unsecured creditors and/or maximize the value of the Debtors' estates," the committee of note holders stated.
The court hearing on bidding procedures is scheduled for tomorrow.