THQ Files For Bankruptcy: Video Game Publisher Sells Off Assets

President says the development of current titles "still in the works."

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THQ (Nasdaq: THQI) has filed for Chapter 11 bankruptcy, the video game developer and publisher announced late Thursday afternoon, just hours before trading ended.

The majority of the Agoura Hills, Calif., company’s U.S. assets, which include its publishing operation and four studios, will be acquired by affiliates of the private equity firm Clearlake Capital Group LP in a deal for around $60 million, a figure that includes a new $10 million note for THQ’s creditors. THQ’s foreign operations, including its branches in Canada, are not included in the filings.

In a statement released to investors, THQ said Clearlake has agreed to acquire its four U.S. studios and its games in development. Selling off its assets will allow the company to "shed certain legacy obligations and emerge with the strong financial backing of a new owner with substantial experience in software and technology."

"The sale and filing are necessary next steps to complete THQ's transformation and position the company for the future, as we remain confident in our existing pipeline of games, the strength of our studios and THQ's deep bench of talent," said Chief Executive Brian Farrell. “We are grateful to our outstanding team of employees, partners and suppliers who have worked with us through this transition. We are pleased to have attracted a strong financial partner for our business, and we hope to complete the sale swiftly to make the process as seamless as possible.”

THQ said it hopes the sale will be finished in about 30 days. Wells Fargo & Co. and Clearlake also agreed to provide debtor-in-possession financing of around $37.5 million, pending bankruptcy court approval. 

Known for popular video game franchises like its WWE wrestling games and the controversial “Saints Row” series, THQ did its best to assure that its current games in development will not be affected. It said it has no plan to reduce staff or close any of the remaining studios as part of the sale of its assets.

Jason Rubin, a celebrated game developer and current president of THQ, called the bankruptcy a “major step in securing financial future” for the struggling company, adding that highly anticipated games like the “South Park” adaptation and the next installments in the “Saints Row,” “Company of Heroes,” and “Homefront” franchises are “still in the works.”

“Response to many requests: Have been & will continue to do EVERYTHING in my power to bring the #SaintsRow sequel out,” he added, attaching a picture of him holding a gigantic purple dildo -- one of the game’s most notorious and polarizing items.

"Does this look like an 'embarassed man?'" he wrote in the photo's caption.

THQ has been struggling to regroup from a series of heavy losses and studio closures for much of this year. In late July, the company was almost delisted from Nasdaq after it struggled to maintain a minimum share price requirement of $1.

Early last month, THQ admitted that it had begun to pursue “strategic alternatives” in the face of heavy losses that cost it nearly half of its cash reserves and forced studios to delay the release of many of its high-profile titles.

Struggling to adapt to a changing marketplace that, Rubin admitted in an interview with Polygon, saw many of its most popular games as “embarrassing,” THQ had tried to rebuild itself as developer of serious, adult-friendly video games. But this was after a similar botched attempt to perform the same about-face for children’s entertainment. Its "uDraw" gaming tablet cost the company more than $100 million by its own estimates, a miscalculation that first put the company on the verge of its Nasdaq delisting.

THQ shares fell by 12 percent on Wednesday to $1.22 before trading was halted on the news. The company’s stock had fallen 84 percent since the start of the year, and more than 96 percent in the last two years.

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