A bankruptcy judge has hit pause on video game maker THQ's bankruptcy case.
THQ planned to sell its assets to Clearlake Capital Group for $60 million. This week, however, U.S. Bankruptcy Judge Mary F. Walrath put the plan on hold by denying the sale, Gamasutra reports.
According to Walrath, THQ didn't make enough of an effort to market the company's assets before settling on Clearlake as the buyer.
THQ filed for Chapter 11 bankruptcy last month after a series of business blunders. Kids' games used to be THQ's bread and butter, but the company eventually lost its footing in the market. In order to revive its kids' gaming line, it released the failed "uDraw" gaming tablet. The flop caused THQ's stock to drop considerably.
THQ planned to repay its creditors by selling its intellectual property, development studios, and all games currently in development. The company quickly settled on Clearlake Capital Group as the asset buyer. Judge Walrath, however, put the sale on hold this week, accusing THQ of failing to do its due diligence in securing the best deal possible.
"I have problems concluding that the pre-petition sale process was fulsome," Walrath said, noting that THQ "did not even put out to the public that it was for sale" until after Clearlake signed a non-disclosure agreement.
According to Walrath, THQ received bids from at least 10 potential buyers, including Warner Bros. The judge suggested that THQ should weigh all of its options before moving forward with a bankruptcy sale. She also noted that THQ could probably make more by selling each of its assets individually rather than as a whole package.
THQ, on the other hand, claimed that it was acting under time constraints. The company said that a $37.5 million loan it plans on taking out would need to be paid off by Jan. 15.
Walrath thought otherwise. "I am not convinced that we are under the gun to have a sale process by the 15th," she said, according to Gamasutra.
- Judge Denies THQ Bankruptcy Plan (Digital Trends)
- Benefits of Bankruptcy (FindLaw)
- Corporate Bankruptcy (FindLaw)
- Media Giant Tribune Co. Exits Bankruptcy After 4 Years (FindLaw's Phoenix Bankruptcy Law Blog)