THQ enters into two-month loan forbearance agreement as head of finance resigns

THQ and the death of the middle tier

Investor representative Wells Fargo has shone some light on THQ’s bleak situation by entering into a forbearance deal with the struggling publisher. The deal prevents lenders from suing the company for loans defaulted on until January 15th, buying it valuable time to release its delayed Q4 line-up of games and, hopefully, slow or even reverse its decline.

Following the agreement, CFO Paul Pucino resigned from his position, and no replacement has yet been named.

“We would like to thank Paul for his significant contributions over the past four years and wish him well in his future endeavours,” said THQ chairman and CEO Brian Farrell.

The company is facing the very real possibility of bankruptcy after its shares plummeted following the release of its last financial report – a report in which the publisher revealed it had defaulted on a $50 million loan and planned to delay the release of its in-development games.

Wells Fargo, which is acting as an agent for the THQ’s lenders, has also promised to lend the publisher more money in addition to forbearance agreement. This option should ensure THQ can afford to complete development of its titles, and market them at launch.

“We are pleased to have reached an agreement with Wells Fargo,” said 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.”

The terms of the forbearance agreement mean that THQ will be required to submit weekly reports to Wells Fargo, and provide a 13-week financial forecast by no later than November 30. THQ has appointed mergers and acquisitions consultant Centerview Partners to discuss other potential strategies to rescue the company, though it is as yet unclear what this “next phase” will be.