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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

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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