THQ’s troubles mount as it defaults on $50m credit

Ailing publisher THQ has defaulted on a $50 million credit facility with lender Wells Fargo, bringing it a step closer to bankruptcy.

A report issued by the company on November 9th confirms that “loan availability on the Credit Facility was less than 12.5 per cent of the maximum revolver amount”, which amounts to a technical default of the terms of the loan.

According to THQ’s SEC report, it was informed by Wells Fargo on November 7 that “one or more events of default have occurred under the terms of the Credit Facility, including the failure to comply with financial covenants” for the most recent quarter.

THQ agreed to the $50 million revolving credit facility with Wells Fargo in 2011. The company borrowed $21 million from that facility during its third quarter, which ended on September 30th, 2012.

The publisher failed to provide the US Securities and Exchange Commission with a 10-Q, a quarterly report that all publicly traded US companies are require to provide. The SCE report was filed as a preliminary update, but THQ’s delay has already been seen as a sign that the worst is still to come.

However, Polygon has been told that Wells Fargo continues to THQ’s requests while the two parties discuss the terms of their credit agreement.

An independent art producer and outsourcing manager from Austin, Jon Jones, who has been researching THQ, foresees four worst case scenarios for the company, with bankruptcy being the nadir if the company is unable to attain funds from another bank facility or privately.

Develop contacted THQ and has been sent the following statement that company president Jason Rubin issued yesterday: “As indicated in our quarterly report (10-Q) filed today, THQ is in discussions with Wells Fargo to resolve an issue with regard to our credit agreement. We believe we will reach an agreement on this matter with Wells Fargo.

“The issue stems from a relatively small amount borrowed against the credit facility in mid-October 2012, which was subsequently repaid in full. THQ currently has $16.4 million outstanding on its facility, which is unchanged since we released second quarter earnings.”