Several lenders have filed an objection to THQ’s fast-track bankruptcy sale, in which it filed for bankruptcy protection and organized a quick sale to Clearlake Capital for $60.5 million.

Clearlake will buy THQ, maker of video games such as WWE wrestling titles and the action-role-playing game Darksiders II, if no other bidders appear within 30 days of the filing, which took place on Dec. 19. The objection states that THQ’s bankruptcy was orchestrated to benefit the company’s newest executives and their friends at a financial firm hired to sell THQ.

The lenders provided THQ with loans of $41 million, or 41 percent of its $100 million loan. They include Silverback Asset Management, Third Avenue Focused Credit Fund, and Wolverine Flagship Fund Trading. They own a part of THQ’s 5 percent convertible senior notes due 2014.


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Clearlake said it would pay off secured claims for creditors in the amount of $29 million. It would pay $6.65 million, assume $15 million in liabilities, and offer lenders a promissory note of $10 million at a 2 percent interest rate, due in seven years. Clearlake gets a break-up fee of $1.75 million and $500,000 in expense reimbursement if the deal does not go through.

In a filing, the lenders said that the timing of the sale is too short to let interested parties make rival bids. Those potential bidders wouldn’t have enough time to kick the tires on THQ’s assets. It also says that THQ should allow bidders to offer bids for some of THQ’s game properties, rather than buying all of them. The publisher’s hot properties include sandbox game Saints Row, Darksiders, apocalyptic shooter Metro, near-future first-person shooter Homefront, and World War II real-time strategy series Company of Heroes. THQ also has rights to make games based on WWE and South Park.

The filing alleges that Clearlake would have too much control over the process. The U.S. trustee overseeing the case, Roberta DeAngelis, filed similar objections.

THQ hired its new president, Jason Rubin, and his partner, Jason Kay, in the spring of 2012. The filing says that in June or so, the two Jasons orchestrated plans to take over THQ and gain significant upside, if they executed a turnaround. They hired Centerview Partners to handle a sale of THQ or find new investors for it. The lenders who objected clearly wanted THQ to consider selling off its game properties piecemeal, but Centerview shopped the company as a whole. The lenders allege the liquidity crisis was “manufactured.”

Still, on Nov. 7, Wells Fargo sent a letter to THQ saying it was in default on its credit facility. THQ said that one of its problems was that its cash held overseas could not be brought back to the U.S. without taxation. Wells Fargo held off on proceeding with default process as long as THQ kept it informed of its finances on a weekly basis. The lenders appear to be critical of THQ’s decision to preserve its game development teams at the cost of draining reserves of cash.

THQ hasn’t responded to a request for comment.

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