THQ Gets Approval of Liquidating Plan Ending Bankruptcy

THQ Inc., the former video-game maker, won court approval of its liquidating bankruptcy plan, ending a case that saw the once-prominent publisher’s titles sold off to former rivals.

U.S. Bankruptcy Judge Mary F. Walrath granted approval of the plan, which pays creditors from the proceeds of selling off virtually all of THQ’s assets, at a hearing today in Wilmington, Delaware.

The company “has met the burden of establishing that the plan should be approved, and I will confirm it,” Walrath said.

THQ, the maker of the “Saints Row” and “Company of Heroes” video games, failed in its bid to survive the bankruptcy intact with a proposed sale to Clearlake Capital Group LP. Instead, most of its assets were sold to competitors at an auction in January, bringing in about $72 million. Unsecured creditors had argued the sale process was too fast and piecemeal offers could create more value.

The company sold the assets remaining from the January auction, including its “Darksiders” franchise, for about $6.6 million, according to an April 22 statement.

The Agoura Hills, California-based former video-game maker said it was forced to seek bankruptcy protection after sustaining losses for the past five fiscal years. The company listed assets of $204.8 million and debt of $248.1 million when it sought court protection on Dec. 19.

Unsecured Creditors

Unsecured creditors are projected to recover 20 percent to 52 percent of what they’re owed, depending on the amount of allowed claims, according to the disclosure statement, an outline of the liquidating plan. They are estimated to have from $143 million to $184 million in claims, according to the statement.

If the amount of allowed unsecured claims falls within that range, the projected recoveries for unsecured creditors would be 31.5 percent to 51.9 percent.

If the claims of European subsidiaries, about $107 million, are allowed, the recoveries are projected to be 19.9 percent to 29.6 percent, court filings show.

THQ said in court papers that the units have enough cash to satisfy their own debts so any distribution to them would ultimately be returned to THQ. Their claims, therefore, shouldn’t be allowed, the company said. THQ claims the surplus could be from $9.1 million to $15.1 million.

European Subsidiaries

The European units argued in court documents that even if they eventually have a surplus to pay back to the parent, THQ would be circumventing bankruptcy procedures by seeking to get paid ahead of their creditors, when as a shareholder of the subsidiaries it should be paid after creditors.

THQ has asked for the subsidiaries’ claims to be subordinated so they don’t have to go through the process of paying them only to have any surplus paid back after the subsidiaries’ liquidations are complete, which the company claims could take two years. Walrath will consider the dispute at a hearing set for Aug. 19.

The case is In re THQ Inc., 12-13398, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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