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Finance

THQ CFO resigns as company negotiates financing alternatives

THQ CFO resigns as company negotiates financing alternatives

Tue 20 Nov 2012 10:44pm GMT / 5:44pm EST / 2:44pm PST
BusinessFinancePublishing

Paul Pucino is out. And THQ has reached an agreement with Wells Fargo, which removes the threat against the company for defaulting on loans

THQ's situation is bleak, and while some industry experts see little hope, THQ today announced that it's taken a couple important steps to better its chances. The first is that the company reached an agreement with Wells Fargo Capital Finance to remove the threat of the firm "exercising its rights and remedies against THQ and its subsidiaries with respect to previous events of default under its credit facility." The forbearance period extends to January 15, 2013, during which time Wells Fargo has also agreed to make additional loans to THQ.

The second important step is that THQ has entered into "exclusive negotiations with a financial sponsor regarding financing alternatives which may result in, among other things, significant and material dilution to shareholders." THQ would not reveal who this financial sponsor is, or what the size of the deal is. Those details will come out should a deal be signed, but THQ makes no promises that negotiations will result in a transaction.

“We are pleased to have reached an agreement with Wells Fargo. This agreement enables us to continue focusing on bringing our games in development to market,” said Brian Farrell, THQ's Chairman and Chief Executive Officer. “Meanwhile, we are evaluating financial alternatives that will transition the company into its next phase.”

The financial difficulties have also resulted in a casualty at THQ, as the publisher also announced today the resignation of Paul Pucino, who had been serving as executive vice president and chief financial officer. No replacement for the CFO role has been named. THQ is "evaluating its alternatives" for the position now, and in the meantime, THQ is retaining FTI Consulting to assist its finance and accounting team.

“We would like to thank Paul for his significant contributions over the past four years and wish him well in his future endeavors,” commented Farrell.

16 Comments

Steve Peterson West Coast Editor, GamesIndustry.biz

108 73 0.7
Really, it's never reassuring when the CFO resigns.

Posted:A year ago

#1
I am just surprised how relaxed everyone is about this? I would have expected some major column inches on how THQ got into this mess?

Posted:A year ago

#2

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,270 2,439 1.1
It's good to see they've come to an agreement with Wells Fargo and now have a major financial sponsor but at the cost of diluting shares is going to hurt.

Posted:A year ago

#3

Andrew Goodchild Studying development, Train2Game

1,254 421 0.3
If they don't do something, the shares will be worth zero, so dilution is the last of the worries. I'm guessing most people still holding the shares have all but written them off now.
Hopefully the projects in production will see the light of day and provide a chance to turn things around. But when you keep hearing that THQ needs to sell 2 million of a game to break even, where is the actual profit going to come from? It seems they forgot 2 million people all liking the game is a large number.

Posted:A year ago

#4

Bruce Everiss Marketing Consultant

1,692 594 0.4
"Financial Sponsor"

Zynga could raid their petty cash and buy up a whole big pile of IP here.

Posted:A year ago

#5

Andrew Goodchild Studying development, Train2Game

1,254 421 0.3
IP that would mean nothing to their fanbase? DarksidersVille is not the most obvious project.
Ubisoft, Bethesda and EA are more likely, but I can't see them buying a going concern that would dump them with so many debts, if they can wait for a chance of buying what they want at the end.

Posted:A year ago

#6

Steve Peterson West Coast Editor, GamesIndustry.biz

108 73 0.7
THQ as a company is a bigger liability than an asset, which is why nobody's snapped it up yet. Publishers are probably waiting until it enters bankruptcy to see what they can pick up on the cheap, without having to deal with what THQ owes to other companies.

Posted:A year ago

#7

Bruce Everiss Marketing Consultant

1,692 594 0.4
I know another big publisher that people are waiting for the break up of so that they can buy the best bits.

Posted:A year ago

#8

Alfonso Sexto Lead Tester, Ubisoft Germany

820 653 0.8
They have good studios in there, like Relic or Volition.

@Bruce: Zynga is barely able to keep it's exploded bubble together and prevent its employees from running away. Do you really believe they could buy THQ with all the studios and powerful (Expensive) IP's?
You really need to double-check your information. You may love Zynga, but you better accept they are in a pretty dare situation too... Which, to be honest, I believe they are the ones to blame for that. They had a lot of examples regarding what happens when you burn the market with an insane number of products (EA Games, for example)

Posted:A year ago

#9

Michal Korec Editor/Analyst

9 1 0.1
Let Zynga buy out all small studios but do not allow them to touch big IPs with some legacy. It is still sad for all people they get on board and are let go lately when they consolidate all new and old teams.

I don't recall reading so much bad corporate news for ZNGA like any other company last two months. They had to lose around 3/4 of their management team and that's never a good signal for anything.

I still hope THQ can manage till next generation and get back on feet. Sure, uDraw was flop and came too late to casual market but they have good IPs at home. Plus, distributor diversity is never bad thing.

Sometimes, I have bad feeling Games Industry will have less big companies than movie industry. And that's something unexpected. When we lose 3 or 4 big distributors each generation, we'll end up with ACTI, EA, UBI and Japanese companies and no one else in industry. Not healthy.

Posted:A year ago

#10

Stephan Schwabe Multichannelmanagement, Telefonica

74 34 0.5
Brian Farrell will bring THQ back on track. THQ is not Atari or midway.

Posted:A year ago

#11

Matthew Hill Head of Recruitment, Specialmove

75 26 0.3
@Bruce - By all means champion the F2P model but there are countless companies making a better job of it than Zynga, both in terms of ROI and gaming experience. Many of these are small operations but deserve far more awareness e.g. Nimblebits (Tiny Tower) Boss Alien (CSR Racing, recently acquired by Natural Motion)

The reality is Zynga benefited from great timing but they have failed to adjust their business effectively to market changes - in particular the shift from Facebook & Browser to mobile and tablet.

Which THQ IP do you (and others) believe Zynga (or indeed any F2P company) could monetise effectively with the Free to Play model ?

Fingers crossed for all at THQ

Posted:A year ago

#12
@ Stephan - what happened too Atari?

Posted:A year ago

#13

Stephan Schwabe Multichannelmanagement, Telefonica

74 34 0.5
@ Kevin, i mean the old Atari not the one that just uses the name right now.

Posted:A year ago

#14

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,270 2,439 1.1
Zynga + THQ? I'd almost be intrigued to see just how fast 2 sinking ships duck taped together actually sinks if it were not for the fact many people would lose their jobs and some valuable IP may get lost in ownership limbo in Davey Jone's Locker.

Posted:A year ago

#15
Agreed, that would be a fun scenario to watch play out. But the last thing Zynga needs is more internal staff.

Posted:A year ago

#16

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