THQ Inc., the maker of “Saints Row” and “Company of Heroes” video-game franchises, won court approval of a revised, longer bankruptcy sale process and loan to help fund operations after reaching an agreement with creditors.
U.S. Bankruptcy Judge Mary F. Walrath at a hearing today in Wilmington, Delaware, approved guidelines that will govern the sale of the company’s assets at a bankruptcy auction and the company’s $37.5 million bankruptcy loan.
The court “approved a process for a sale by Jan. 23” that keeps Clearlake Capital Group LP as the lead or so-called stalking-horse bidder, Jeffrey C. Krause, a THQ attorney, said in an interview after the hearing.
Potential buyers will have to submit bids by Jan. 22, and the company will hold an auction later that day to determine the best offer for the assets. THQ will seek court approval of the sale at a hearing scheduled for the next day, with closing expected on Jan. 24.
Walrath denied the company’s request at a Jan. 4 hearing to hold an auction 21 days after seeking bankruptcy protection; persuaded by creditors’ arguments that the timeframe was too fast to give prospective buyers a realistic opportunity to evaluate the assets. THQ and the creditors hadn’t reached an accord when today’s hearing started after Walrath directed them last week to negotiate over the weekend.
The revised sale process will allow potential buyers to make “piecemeal bids” for individual assets and video-game titles, a change creditors were pushing for, Krause told Walrath at the hearing.
THQ sought bankruptcy protection Dec. 19 with an agreement to sell virtually all its assets to Clearlake Capital Group LP in a deal then valued at about $60 million, which included paying off secured debt, $6.65 million cash, assuming certain liabilities and a $10 million note.
Clearlake has dropped the $10 million note after creditors’ lawyers called it a “hope note,” ascribing no value to it. The Los Angeles-based private equity firm also reduced the fee it would get if it’s beat at auction.
THQ listed assets of $204.8 million and debt of $248.1 million in Chapter 11 documents filed Dec. 19. The company said it was forced to seek court protection after sustaining losses for the past five fiscal years.
“Saints Row,” with more than 11 million units shipped globally, is THQ’s most-successful franchise, according to a May press release. THQ also published the “Darksiders” and “Red Faction” franchises, according to its website.
The video-game maker said it required more time for some titles and had to delay the March introductions of “South Park: The Stick of Truth,” based on the popular adult cartoon show from Matt Stone and Trey Parker; “Company of Heroes 2” and “Metro: Last Light.”
Electronic Arts Inc., the second-biggest U.S. video-game publisher, “is one of the potential bidders and has completed site visits,” Krause said at today’s hearing.
At last week’s hearing, Howard J. Weg, a lawyer representing Warner Bros. Entertainment Inc., said the company would be interested in evaluating THQ’s assets and potentially making a bid if the sale process is extended. Warner Bros. bought most of the assets of “Mortal Kombat”‘-maker Midway Games Inc. out of bankruptcy in July 2009.
The case is In re THQ Inc., 12-13398, U.S. Bankruptcy Court, District of Delaware (Wilmington).