Bankruptcy isn't easy as THQ auction delayed and loan denied, next hearing on January 7
In bankruptcy, paying off creditors takes priority over employees
The original plan for THQ to declare bankrupt and quickly sell the company has hit a speed bump. The Judge presiding over the bankruptcy case has decided the current schedule is too limiting and that further time may be needed for potential buyers of THQ to evaluate the situation. Approval of a bankruptcy loan was also denied or perhaps just delayed. After a lawyer huddle, all parties will reconvene on January 7.
Now, THQ's goal was quite obviously an attempt to speed through the process of bankruptcy and be purchased by Clearlake group without loss of employees or excessive burden. Bankruptcy has different goals. Chapter 11 is the process or reorganizing a company, allowing it to continue to function while also planning out debt repayment. Essentially what has happened is THQ's creditors requested more time for potential buyers that aren't Clearlake to consider purchasing the company.
In other words, THQ's creditors want to make sure they're getting the most out of the auction process and they don't believe a quick sale to Clearlake is necessarily the best way to do that. The Judge didn't necessarily agree, but found that THQ didn't persuade her otherwise. Thus, the lawyers need to talk and the process is slightly delayed. The loan denial is likely just a result of of that delay.
What's next? Well, the lawyers will likely meet and agree on a new auction date somewhere within the three weeks after January 15. Could this mean THQ may face undue financial troubles in the mean time? Perhaps, but it's likely another loan will be approved soon to prevent that. Could that mean another company may purchase THQ instead of Clearlake (Warner Bros. is apparently showing interest)? Perhaps, but it's more likely the price would simply go up and Clearlake would match that.
As far as THQ's games, the hope is that their development is continuing along smoothly without being affected by these legal events. But in all honesty we may see further delays just so THQ can get get back on their feet and ensure these games are properly marketed and reach their audience.
Source: Business Week
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Belive me, folks, the corporate reality is very different than you both think; we need to look at the underlying notion behind everything!!!!
No company is too big to fail, that was one of the lessons from the GFC. Also financiers/creditors aren't necessarily huge corporations, there will undoubtedly be some smaller companies/private shareholders caught up in this.
Also, the priority schedule is not as bad as you think, listed in order of payment priority:
Liquidators costs
Creditors with fixed charge over assets
Costs incurred by an administrator
Amounts owing to employees for wages/superannuation (director limit $2000)
Payments owing in respect of workers's injuries
Amounts owing to employees for leave (director limit $1500)
Retrenchment payments owing to employees
Creditors with floating charge over assets
Creditors without security over assets
Shareholders (Liquidating distribution)
So overall employees come out better than creditors without securitised assets in the event of a liquidation and financiers (floating charge and shareholders) bear the brunt of the loss, not to mention that the CEO has a wage cap. So basically looking for a higher bidder will be beneficial for employees, creditors and shareholders, not to mention that its just good corporate governance to prevent management from doing anything dodgy.
Yes, sacking is common in every capitalist nation. It's obivious that you don't realise that I'm emphasising the (fundmental) rights of workers compared to the potential greed of creditors/ CEOs. This is a complex problem; therefore, no magic formula can be applied but some rights are inalienable for workers. We're not living in the middle age!!
In a sense it's pathetic that Chapter 11 often includes vulturing a company to pieces as part of it. "Well you could get 40% more if we dissolved the company entirely and sold off the rights / assets / progress to 25 teams across the world." is how these cases can often develop. THQ doing the deal they did was more for the sake of keeping this ship together vs parting it out to whoever opted the most for each section of the pie. Hopefully better news comes on the 7th,
Fortunately when the deal goes down eventually, we'll have rough numbers of what the creditors were going to get vs what they wanted to flip their investments for. The excuse of "well the poor investment employees" doesn't really work when they were addressing the debt settlements themselves but the companies weren't satisfied with how much they were going to take out of the deal.
Well, I'm awared that creditors/fiananciers need some sort of protection, but this must not be implemented at the expense of poor workers and above all, insteading of putting millions dollar back into the pockets of the CEOs in the midst of THQ bankruptcy, workers should have some sort of compensation/rights rather than forcing them to accept the ideology of 'pracitsing capitalist greed' that led to the GFC.
It's in the interest of the majority of the public to get some protection that compaines can't provide, in an age of global businees networks, (greedy) international financiers are too big to fail...
No need to sympathise as long as they've millions of dollars in their CEO pockets; I know where their compensation money will go next, i.e. to create another corporate empire at the expense of workers again.
Workers rights must come first!!!
Also while I sympathise with the employees, its in the best interest of the company overall that they take bids from numerous buyers.
It's not like they did anything that terrible, either. They're just saying that a deal made in a back room between THQ and their potential funder may not be the best they can do, rushing things isn't going to help the development studios or their games either.
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