THQ says in talks with sponsor, CFO resigns
SAN FRANCISCO (Reuters) - Video game publisher THQ Inc THQI.O said on Tuesday that it has entered into exclusive talks with a financial sponsor for potential financing alternatives.
The Agoura Hills, California-based company, which has cut staff and shut non-core businesses in an effort to revive its business, did not provide further details while negotiations were underway.
The agreement "may result in, among other things, significant and material dilution to shareholders," it said.
Paul Pucino, its executive vice president and chief financial officer, has resigned, the company said in a press release.
The company added that Well Fargo Capital Finance LLC has agreed to forgo taking action against the games publisher on any default on its $50 million credit facility until January 15, 2013.
THQ's shares rose 12 percent and closed at $1.25 in the regular Nasdaq session.
Known for its wrestling and "Saints Row" games, THQ also said that it had hired Centerview Partners LLC to help evaluate financing and improve liquidity.
THQ has been losing ground to larger rivals including Activision Blizzard Inc (ATVI.O). The company's stockholders approved a 1-for-10 reverse share split of its common stock in late June to raise its stock price and avoid being delisted.
In a Securities and Exchange Commission filing last week, THQ said Wells Fargo warned the company on October 16 that it had borrowed beyond the limits of its loan terms.
THQ then made a $5.6 million payment on the $21 million that it had borrowed in the quarter ending September 30 in an attempt to regain compliance under its loan agreement. Wells Fargo then informed the company that it was in default under the terms of its credit facility, according to the filing.
Executives announced on a November 5 earnings call that they were postponing the release of several titles including its "South Park" game, increasing the company's need for capital.
The company also has $100 million in convertible notes that are due in August 2014.
(The story is corrected to change game title to "Saints Row" in 7th paragraph)
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