THQ inks loan default forbearance, negotiates with financial sponsor

By Caroline Salls

Pittsburgh, Nov. 20 - THQ Inc. has entered into a credit agreement forbearance agreement with Wells Fargo Capital Finance, LLC, according to a company news release.

Under the agreement, Wells Fargo has agreed not to exercise its default-related rights and remedies against THQ and its subsidiaries until Jan. 15. The agreement requires the company to maintain excess availability of at least $4 million during the forbearance period.

According to an 8-K filed Tuesday with the Securities and Exchange Commission, the events of default covered by the agreement primarily include the company's failure to maintain a fixed charge coverage ratio of at least 1.10 to 1.00 for the 12-month period ended Sept. 29.

During the forbearance period, Wells Fargo will make additional loans to the company, subject to the terms and conditions of the forbearance period.

Exclusive negotiations

Additionally, THQ said it has entered into exclusive negotiations with a financial sponsor regarding financing alternatives, which may result in significant and material dilution to shareholders.

The company said information on the identity of the sponsor, deal size, structure and/or timing would not be disclosed until negotiations have concluded.

"[The forbearance] agreement enables us to continue focusing on bringing our games in development to market," THQ chairman and chief executive officer Brian Farrell said in the release.

"Meanwhile, we are evaluating financial alternatives that will transition the company into its next phase."

CFO resigns

According to the release, THQ executive vice president and chief financial officer Paul Pucino has resigned.

The company said it is evaluating its alternatives for the CFO role. THQ has retained FTI Consulting to assist its finance and accounting team.

Pucino resigned on Wednesday, but may provide transition services through Dec. 3, the 8-K said.

THQ is a developer and publisher of video games based in Agoura Hills, Calif.

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