THQ Begins Negotiations To Stave Off Destruction
The THQ story’s final chapters are possibly being written as I write this, as it’s been announced today in a press release that the company has entered into a forbearance agreement with Wells Fargo Capital Finance, LLC. This agreement will provide THQ with additional time to negotiate with an unnamed partner to finance what the company euphemistically called “strategic alternatives” during their most recent investor call. THQ CFO Paul Pucino has also resigned, and as a hint to what the company may be planning, they have not announced a replacement for him.
In the agreement, Wells Fargo Capital Finance will not exercise “its rights and remedies against THQ,” in other words call in THQ’s chits, until January 15, 2013, and Wells Fargo will continue to make additional loans to THQ during this period. THQ also confirms that it has begin “exclusive negotiations” with an unnamed financial sponsor to secure “financial alternatives” aimed at shoring up their short term debt. No concrete information about these negotiations, their nature, the identity of the sponsor, or the terms of any agreement were revealed in the press release, which might as well be an invitation to the baseless speculation Olympics.
I would be willing to bet that at this point, THQ’s only hope is to be bought out by a larger company, and I wouldn’t be shocked to discover that such a deal is what is being negotiated. Unfortunately, THQ is going to have to deal with its tremendous debt if it wants to have any chance of surviving as an intact entity, and that seems unlikely given how desperate their situation is. More likely is that they’re forced to dissolve the company, then sell off the individual pieces one by one. We’ve already seen Ubisoft expressing interest in purchasing THQ properties, and likely that scheme, and not making THQ a division of another company, is the future.
Hopefully something is worked out that saves the jobs of their developers; especially the developers at Volition, because I am going to cry if Saints Row dies over this.
THQ Provides Update on Its Credit Facility and Announces Exclusive Negotiations with Financial Sponsor for Potential Financing Alternatives
AGOURA HILLS, Calif.–(BUSINESS WIRE)– THQ Inc. (NASDAQ: THQI) announced today that it has entered into a forbearance agreement with Wells Fargo Capital Finance, LLC. Under the agreement, Wells Fargo has agreed to forbear from exercising its rights and remedies against THQ and its subsidiaries with respect to previous events of default under its credit facility. The period of the forbearance currently extends to January 15, 2013, during which time Wells Fargo has agreed to make additional loans to the company subject to the terms and conditions of the forbearance agreement.
Additionally, THQ announced that it has entered into exclusive negotiations with a financial sponsor regarding financing alternatives which may result in, among other things, significant and material dilution to shareholders. Information concerning the identity of the sponsor, deal size, structure and/or timing will not be disclosed until such time negotiations have concluded. There can be no assurance these negotiations will result in a transaction.
“We are pleased to have reached an agreement with Wells Fargo. This agreement enables us to continue focusing on bringing our games in development to market,” said Brian Farrell, THQ’s Chairman and Chief Executive Officer. “Meanwhile, we are evaluating financial alternatives that will transition the company into its next phase.”
THQ also announced today the resignation of Paul Pucino, Executive Vice President and Chief Financial Officer. The Company is evaluating its alternatives with respect to the Chief Financial Officer role, and has retained FTI Consulting to assist its finance and accounting team.
“We would like to thank Paul for his significant contributions over the past four years and wish him well in his future endeavors,” commented Farrell.