Earlier this week several creditors raised objections to the proposed plan for a quick sale of THQ‘s assets to Clearlake Capital Group on the grounds that the sale would favor the company’s management and staff, rather than focus on paying off as much of the outstanding debt as possible.
On Friday U.S. Bankruptcy Judge Mary F. Walrath sided with the company’s creditors and ruled that the current deal did not allow enough time for other interested buyers to get involved with the process. The Judge therefore rejected THQ‘s plan to obtain additional loans to fund continued operations and proceed with a quick bankruptcy sale.
Judge Walrath told lawyers at the hearing, “I have problems concluding that the pre-petition sale process was fulsome… [THQ] did not even put out to the public that it was for sale [until after buyers signed non-disclosure agreements”.
She then added, “I am not convinced that we are under the gun to have a sale process by the 15th, [another hearing is scheduled for January 7th] in the meantime I think the parties need to talk.”
The publisher’s creditors also wanted bidders to have the option of making offers for THQ’s individual video game brands (which is something that Clearlake Capital Group has opposed), on the grounds that the individual bids would bring in more money than the wholesale of all the company’s assets.
In total there are five companies that are in the process of due diligence — meaning they are investigating offers to make bids on the assets — according to testimony from Centerview Partners banker Sam Greene. While Ubisoft has been rumored to be one of those potential bidders, Warner Bros. Entertainment — who purchased the Mortal Kombat brand when Midway Games filed for bankruptcy in 2009 — is the only company confirmed to be an interested bidder. The company’s lawyer, Howard J. Weg, stated at the hearing that they would like to evaluate THQ‘s assets if the sale process is extended.
With THQ‘s plans for a quick bankruptcy sale currently on hold, all eyes turn towards the scheduled January 7th hearing. We will let you know as soon as any information about the future of the struggling publisher is announced.
Source: Bloomberg Businessweek