Bankrupt THQ owes WWE $45 million, Vince McMahon "furious"

WWE stockholders, please don't blame me for this ungodly mess! - Michael N. Todaro

Oh no, Vince McMahon is on the warpath again! Now he's in another one of his legendary foul moods after hearing that THQ, which owes WWE a mammoth $45 million on their existing video game agreement, has filed for bankruptcy AND is in the process of selling all their assets to a private equity firm.

In a business news story with significant ramifications for WWE going forward, their video game publisher THQ, finally filed for bankruptcy yesterday. This, after several years of huge financial losses (since April 2008 they've lost a whopping $825+ million).

That doesn't mean the company is going out of business though with immediate effect, as they've entered into an an Asset Purchase Agreement with a "stalking horse bidder" who are affiliates of Clearlake Capital Group (CCG), a firm that specialises in buyouts, recapitalisations and reorganisations of failing businesses. With the help of Wells Fargo, an American bank, CCG have raised $60 million to assume the existing contracts of THQ's developmental studios, which would include the WWE game franchise, unless someone else offers THQ a better deal.

In THQ's press release on the matter, they tried to spin that business would continue as normal, but obviously that wouldn't reassure savvy investors, or their creditors, which obviously includes WWE.

Upon hearing the news, WWE immediately sent out a short press release simply stating that they were, "following the developments of THQ’s bankruptcy filing and proposed sale" and "anticipates actively participating within this proceeding".

With the filing revealing that THQ owes WWE a mammoth $45 million, WWE sent out another press release today to reassure their stockholders that this wouldn't negatively affect their overall profitability or financial position:

"WWE (NYSE:WWE) is listed in THQ, Inc.’s recent bankruptcy filing as an unsecured creditor holding a claim of approximately $45 million reflecting the entirety of the existing multi-year agreement. Any impairment of a current THQ account receivable would be immaterial to WWE's financial statements. Even if the impact of THQ’s bankruptcy were detrimental to WWE, the Company does not believe that the ultimate economic impact for financial statement purposes would materially and adversely affect the results of operations or financial position of WWE in light of the strength of the WWE brand and the historical performance of WWE's video game business."

The fact that WWE is an unsecured creditor, means WWE isn't guaranteed to get all the money owed them. In a struggling video game market, they may not be able to find such a lucrative deal elsewhere.

The news is even worse for investors of THQ, as they'll be the last in the queue to get paid out. Indeed, Eric Savitz of Forbes called a brief rally in THQ's stock price "the stupid man's trade du jour":

"Not a big deal in the scheme of things, but people who are bottom-fishing in shares of video game maker THQ are being total dunderheads....

But the problem is this: THQ has $150 million or so in liabilities. At the current price, common holders will get zilch. Even if some crazed bidder doubles the purchase price of the company to $120 million, shareholders still get nothing.

If you really are determined to "invest" in THQ, I can provide the same returns with zero commission. Take the following steps: Pull out your wallet. Take out all the cash. Now go get some matches. Light one. And set your money on fire."

Alternatively, buy a copy of WWE '13, Cagesiders, as THQ could do with your money at the moment, and at least you would get something in return.

Clearly, Vince McMahon doesn't like seeing his money go up in smoke, unless its on his own personal vanity investments, like his bodybuilding league, football league, Times Square restaurant, movie division and WWE network.

So, how do you think he's taking the news?

About as well as when he was there in person to see his wife Linda having pissed another $50 million of his hard earned fortune down the drain on a second electoral defeat. According to Dave Meltzer, he had heard Vince McMahon was "furious" and now he know why.

I really wouldn't like to be a WWE staff member this week. Already overworked, due to the heavy taping schedule to get everything done before Christmas, now they have to deal with Vince McMahon being on the warpath again.

It's also not the best time to be WWE lawyer Jerry McDevitt, who has likely had to take a very heated phone call from Mr. McMahon to do whatever the hell he can to get out of the THQ deal. But I guess he's used to it all by now and at least he can charge steep rates for the privilege.

As video game players, what do you think, Cagesiders? Would you prefer the WWE franchise to still be developed by the same company that has done so for the past 13 years, who have proven to be a safe pair of hands, or do you think a new developer could take the series to the next level?

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