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THQ's creditors cry foul over Clearlake plans
THQ's creditors cry foul over Clearlake plans
January 4, 2013 | By Mike Rose

January 4, 2013 | By Mike Rose
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    10 comments
More: Console/PC, Business/Marketing



As THQ looks to hand itself over to a new owner, a number of its creditors have come forward to oppose the bankruptcy and takeover plans, calling them "unfair and unreasonable."

THQ filed for bankruptcy last month, and revealed that Clearlake Capital Group is fronting $60 million to acquire its business, including its development studios and all of its games currently in development.

However, with the Clearlake deal scheduled to go through later this month, several of THQ's lenders have filed objections to the move, alleging that THQ has an agenda that works out well for the company, but not so much for its creditors.

Silverback Asset Management, Third Avenue Focused Credit Fund and Wolverine Flagship Fund Trading Limited -- all noteholders for THQ -- believe that the current deal has "been designed specifically to thwart any potential bidders from stepping forward to compete with Clearlake's bid."

Their complaint states that the current motion will not maximize the value of THQ's estates, but rather has been put in place to ensure that Clearlake gains THQ's whole business, "regardless of whether such a sale is in the best interests of the Debtors' unsecured creditors."

And why would this be in THQ's best interests? Claims the complaint, the sale has been designed such that THQ's current management executives will retain their positions in the company.

"The Bidding Procedures Motion contains scant reference to the discussions and/or agreements between the Debtors and Clearlake with respect to employment of the Debtors' management and employees following the sale, as well as the steps the Debtors took to ensure that the sale process is fair in light of such agreements," it reads.

"If the members of Debtors' management are concerned more with retaining 'control' over the Debtors than maximizing the value of the Debtors' estates, their interests clearly conflict with those of the Debtors' unsecured creditors."

Elsewhere U.S. Trustee Roberta DeAngelis, who is overseeing the bankruptcy filing, has her own objections to the motion, as noted by Distressed Debt Investing.

In her own objection, DeAngelis states that the short window of opportunity for potential bidders to show their interest in THQ is not acceptable, and that there is clearly a rush to get the deal with Clearlake sorted.

The Silverback, Third Avenue and Wolverine complaint agrees, suggesting that THQ purposely used the holiday period -- a time when it knew potential buyers would be away from the office -- to push the Clearlake deal through more quickly.

Gamasutra has contacted THQ for a response to the complaints.


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Comments


Ramin Shokrizade
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My concern with this whole deal when it was announced was that the price seemed very low for rights to the various IP's owned or controlled by THQ. My concern is that a new owner could just sell those IPs piecemeal at a hefty profit while totally dismantling the company. Yes I know even US presidential aspirants engage in such behavior, but my concern is whether the investors/creditors for THQ are getting their fair share or is this some sort of money grab?

dude od
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this was orchestrated by the THQ execs, there is a major conflict between THQ executive management Jason Rubin and Jason Kay (THQ executives), and Skip Paul a principal at Centerview who have made millions of dollars together on a private equity deal concerning the sale of a company named "Flexor".

Dimitri Del Castillo
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Clearlake must be a subsidiary of Bain Capital.

Patrick Haslow
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Can't say I care really. It's a better deal for the devs.

dude od
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i disagree this is better for the Dev's. I don't believe a private firm run by the same people that ruined THQ will lead to success for the Dev's or IP. But some of the Dev's and IP landing under the more proven competent management of UBI or Activision would give them a better chance and bring a better return to the creditors.

Dave Smith
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Rubin hasnt been around long enough to be blamed for THQ's demise, but I'd have an incredibly hard time new management would keep any other execs around.

Beyond Good and Evil
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5 years now - myself and many others have been predicting the inevitable bankruptcy of THQ and naming names of those people in the company who were responsible. Will these people EVER be held responsible for their actions? Ever? No, of course not.

This sad little rush sale fiasco is just another seedy little episode in a seedy little company's history.

My heart goes out to the staff who are really both the pawns and victims in this whole sordid affair.

Dimitri Del Castillo
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Back when I worked there (more than five years ago) they were sinking tons of money into awful shovelware titles that had expensive licensing. Both THQ and Take 2 (worked for them too) were in a neck and neck race to the bottom with this kind of business plan.

Patrick Haslow
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New management can instantly turn around and shut down a dev team-or worse, like just buying some IPs they want, then let the unbought die. Either way, sounds worse for the devs to me.

The fundamental issue that bothers me about deals like this is the lack of understanding of what actually makes a good game IP. Business people don't seem to understand that just because you buy an IP, and have the right to use its name, tech, characters, settings, etc. in the future, doesn't mean you can continue its value by creating revolving door studios with the "dev-team-of-the-moment" creating the next installment and slapping the IP name on the cover. When original dev teams are lost or broken up, much of the IPs value is lost.

Creditors have the talent of creating money with money. Developers have the talent of creating money with talent. Still, The law is the law.

Beyond Good and Evil
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Love this quote form above, "And why would this be in THQ's best interests? Claims the complaint, the sale has been designed such that THQ's current management executives will retain their positions in the company."

Answer: IT ISN'T IN THQ'S INTEREST OR THE INTEREST OF THE CREDITORS.

Oh of course Brian Farrel should be retained - after all he was just the CEO of the company while THQ lost, um, 99% of it's value. Of COURSE you'll want to hang onto a) the guy who ran the company into the ground and b) the guy who appointed the executives currently running the company.

Great idea.

The terrifying part is that these kind of discussions even happen, that it could actually be true that you can destroy a company this completely and still retain your position and be paid an enormous salary.

Welcome to the game industry folks.


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