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THQ Files For Bankruptcy

THQThe inevitable has happened, as the struggling publisher THQ has reported for Chapter 11 bankruptcy, a protective service in the Delaware courts, that will keep the company’s sales of their current and future projects going without a hitch. We’ll see. The company has also entered a purchase agreement with some sort of high-end bidder to acquire “substantially all of the assets of THQ’s operating business, including their four owned studios and games in development.” Here’s the full story, straight from Yahoo, just look out for legal jargon.

AGOURA HILLS, Calif.–(BUSINESS WIRE)–

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. “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, “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.

It’s way too early to fully speculate where all of their various properties will go. As far as consumers go, things will go relatively unchanged as we enter 2013. The biggest point is that this doesn’t mean the publisher is dead. It would be a hard fight to bounce back, but a little comic book company called Marvel did this whole shebang 16 years ago. Even if Marvel was the exception and not the rule, there’s a chance that THQ isn’t completely gone. However, the dissolving of their upcoming titles is troubling. THQ said last month that there were 10 games in the pipe for up to 2014.
Again, we can’t really even fathom what will happen next for THQ, it’s just such a shame that a great company like this has been reduced to rubble. Maybe this is a harbinger for other big-named companies. AAA games are becoming harder and harder to produce and make popular as this generation rolls on. If THQ, makers of wonderful titles like Saints Row, Darksiders, and the upcoming South Park: The Stick of Truth,  can’t make it, where does that leave big named developers not under the EA or Activision umbrella? It’s a reasonable claim to make, as the casual gaming audience is shrinking with the years going on, and the world economy still as restless as ever.
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