THQ fends off default with forbearance deal

THQ fends off default with forbearance deal
Seth Tipps

By Seth Tipps

November 21st 2012 at 8:48AM

Publisher protected from creditors' legal action until January 15th next year

THQ has entered into a loan forbearance agreement that prevents lenders from suing for default until January 15th.

The company is on the edge of extinction after its last quarterly report showed poor revenues and the delay of all titles for the next quarter.

Wells Fargo, acting as agent for the company's lenders, has not only agreed to loan forbearance but promised to provide additional loans to THQ.

In addition, the publisher is in talks with a "financial sponsor" that could provide some additional financing, but the terms of this deal will remain secret until concluded.

This deal is certainly good news for THQ, but reveals just how close the publisher is to bankruptcy.

The agreement prevents legal action for just under two months, but also states explicitly that under current agreements THQ is already subject to default.

"We are pleased to have reached an agreement with Wells Fargo," said THQ CEO and chairman Brian Farrell.

"This agreement enables us to continue focusing on bringing our games in development to market. Meanwhile, we are evaluating financial alternatives that will transition the company into its next phase.”

Under the terms of the forbearance agreement THQ will submit weekly reports and provide a 13 week financial forecast to Wells Fargo by no later than November 30th.

While it is unclear what THQ's "next phase" would be, the company has hired a mergers and acquisitions consulting firm, a deal which hints the publisher could be looking for a buyer.