THQ sale in turmoil as creditors raise concerns

Creditors of troubled publisher THQ have filed complaints about the proposed sale to Clearlake Capital Group.

THQ was declared bankrupt last month and immediately announced that it had agreed a sale to Clearlake in a stalking horse bidder” deal.

However, US Trustee Roberta DeAngelis, who is overseeing the bankruptcy, has filed an objection saying firstly that the proposed schedule of the sale is too short and prevented other potential buyers from participating. This rush is blamed on the actions of the secured lenders, who as part of the agreement will be fully reimbursed.

She is also unhappy with the break-up fee and expense reimbursements, as well as the way they have been categorised as a superiority admin expense that is in breach of the Bankruptcy Code.

In addition, another group of creditors has also filed its own objections, again taking issue with the way Clearlake’s potential purchase has been structured. It is unhappy that THQ’s assets are not being sold individually, arguing that the auction process as it stands is meaningless.

Approval of the bidding procedures proposed by the Debtors and Clearlake would have the opposite effect,” a document hosted by Distressed Debt Investing reads. The Bidding Procedures appear to have been designed specifically to thwart any potential bidders from stepping forward to compete with Clearlake’s bid.

The Bidding Procedures contain numerous provisions that would limit bidding, including, among other things, (i) an unjustifiably accelerated sale timeline that will prevent prospective bidders from having an opportunity to diligence” the Debtors’ assets prior to submitting a bid, (ii) a requirement that prospective purchasers bid on the Debtors as a whole” rather than on a piecemeal” or title-by-title” basis, (iii) various provisions that would allow the Debtors to unreasonably reject bids and/or bidders regardless of the impact to the Debtors’ unsecured creditors, and (iv) provisions that grant Clearlake unreasonable amounts of control over the bidding process.

Rather than being designed to maximize the value of the Debtors’ estates, the Bidding Procedures, by design or otherwise, render the auction process” meaningless and virtually guarantee that Clearlake will be the ultimate buyer, thereby ensuring that the Debtors’ management retain their positions within, and operating control over, the Debtors’ organization.”

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