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THQ in default with Wells Fargo over $50 million credit facility

  • Thread starter Deleted member 102362
  • Start date
T

Tomat

Wanna hear a good joke? Waste your time helping me! LOL!
ezekial45 said:
So if it were up to you guys, which publisher would be best for any of THQ's properties? Saint's Row and Red Faction should go to WB Games, and Darksiders should end up with SE. Those be a great fit for them.
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That actually sounds like a pretty nice fit for those studios.
 
T

Tagg9

Member
Even if they are able to publisher their trifecta of games next year, I can't imagine any amount of sales will keep them in business.
 
M

Macho Madness

Member
ChosenPredator said:
I'm interested because maybe WWE will finally go to someone who can make good wrestling games.
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I honestly think a lot of the problems have to do with the WWE itself. Sure, THQ and Yukes could be doing better in a lot of areas, but WWE probably doesn't want them focusing on certain things. They want the video game to reflect their TV product.
 
TaroYamada

TaroYamada

Member
ezekial45 said:
So if it were up to you guys, which publisher would be best for any of THQ's properties? Saint's Row and Red Faction should go to WB Games, and Darksiders should end up with SE. Those be a great fit for them.
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All should go to SE, I don't want Volition at WB. The only one I would be okay with ending up elsewhere is Relic at SEGA, as SEGA's managed Creative Assembly rather well in my view. Either way, I'd prefer THQ remain intact. I feel they are a good publisher.
 
A

AAK

Member
So how bad would it have been if THQ didn't fire the Relic/Volition staff and stopped funding Devil's Third?
 
D

Drakeon

Member
Klepeck warned us this was bad on the last bombcast, didn't realize it was this bad.

Tough to see THQ go down like this.
 
M

Macho Madness

Member
TaroYamada said:
All should go to SE, I don't want Volition at WB. The only one I would be okay with ending up elsewhere is Relic at SEGA, as SEGA's managed Creative Assembly rather well in my view. Either way, I'd prefer THQ remain intact. I feel they are a good publisher.
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THQ puts out fine stuff, but there's only so many times your company can make awful business decisions before it all goes to hell. They bet the company on the U Draw and that will ultimately be the death of them.
 
S

SolidSnakex

Member
I'd still really love to know who greenlighted the uDraw disaster at THQ

Buoyed by the initial success, THQ quickly cranked out uDraw tablets for the Xbox 360 and PS3, and got to work licensing new compatible software from big, family-friendly brands like Kung Fu Panda, Spongebob Squarepants, and Disney Princesses. But that expansion now looks like a colossal mistake, as excess uDraw inventory was a major factor in the huge financial loss reported for the company's recent 2011 holiday quarter.

How big was the debacle? While THQ said it had shipped "one million or so" uDraw tablets to stores in 2011, it admitted many of those had to be sold at a reduced price (most retailers are now selling the device for $50, rather than its $70 to $80 launch price).

What's more, THQ says it has over 1.4 million uDraw tablets sitting unwanted and unloved in its warehouses, damaging its bottom line for the quarter to the tune of $100 million and contributing to a dismal $55.9 million loss for the company as a whole.
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http://arstechnica.com/gaming/2012/...utionary-udraw-now-filling-warehouse-shelves/
 
S

Sinatar

Official GAF Bottom Feeder
Relic, Nooooo.

ivjICB6Ndz1f7.gif
 
TaroYamada

TaroYamada

Member
thewesker said:
THQ puts out fine stuff, but there's only so many times your company can make awful business decisions before it all goes to hell. They bet the company on the U Draw and that will ultimately be the death of them.
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De Blob 2 as well, which despite the failure, was a good game. It's kind of funny how perfect a fit uDraw would be on Wii U/3DS had they not killed the franchise.
 
P

pwack

Member
Nirolak said:
It means THQ doesn't have enough money to pay their loan bill.
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I don't think that's quite right. Its hard to tell without seeing the loan docs, but The quote makes it looks like they are breaching a covenant as to debt or lending ratios between two loans, ie, took out to much on one credit line compared to another. There is no mention of failure to repay interest or principal.

Granted, to get the loans righted, they may need to pay back some debt.

Edit: the most common sort of loan default is missing a payment, but a loan agreement can have a ton of covenants, such as "company x must maintain financial stat y at level z". Failure to do so counts as default. And in most instances, when you default, all you debt can be called in immediately.
 
N

Nirolak

Mrgrgr
pwack said:
I don't think that's quite right. Its hard to tell without seeing the loan docs, but The quote makes it looks like they are breaching a covenant as to debt or lending ratios between two loans, ie, took out to much on one credit line compared to another. There is no mention of failure to repay interest or principal.

Granted, to get the loans righted, they may need to pay back some debt.

Edit: the most common sort of loan default is missing a payment, but a loan agreement can have a ton of covenants, such as "company x must maintain financial stat y at level z". Failure to do so counts as default. And in most instances, when you default, all you debt can be called in immediately.
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But if they had the money necessary to not breach their covenants they wouldn't end up in this situation, no?

I mean, all they would have to do to leave more than 12.5% of their loan amount open is to not draw that much money.

I'm assuming THQ isn't just sitting there going "Oh whoops, I forgot what my limit was!", though if they are, I guess that would explain a lot as to how the company got to where it was in the first place.
 
Petrae

Petrae

Member
Interesting note in THQ's SEC filing on Friday regarding used games:

Sales of Used Video Games

Several retailers, including one of our largest customers, GameStop, continue to focus on selling used video games, which provides higher margins for the retailers than sales of new games. This focus reduces demand for new copies of our games. We believe customer retention through compelling online play and downloadable content offerings may reduce consumers' propensity to trade in games. Additionally, certain titles include free access to online content through a code (included in the packaging) for initial purchasers. This structure creates a new revenue stream by offering second-hand buyers of these titles the opportunity to separately purchase the online content.
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P

Pachinko

Member
I'm honestly curious if Jason Rubin looked at his product portfolio , noted that darksiders 2 preformed about half as well as expected and saw what was left then simply through his hands in the air and said "fuck it". Delaying all of their games was more of a way of saying "we've given up , if someone would just buy us out already that would be great".

And honestly, given what some developers with far less IP's have sold for over the last few years - buying THQ entirely for the value of it's stock + all of it's debt would still cost less then say the bioware buyout by EA and that was merely a single developer.

At this point , they haven't got enough money to finish any of their next 4 big games and they need to release those 4 games to get any money back to finance anything in the future. This clearly isn't happening so by announcing the company is out of cash plummeting the stock price they've made THQ ripe for the purchase.
 
Petrae

Petrae

Member
Also, here's the portion of the SEC filing that talks about the Wells Fargo situation:

In connection with the Company’s Credit Agreement with Wells Fargo Capital Finance, LLC (“Wells Fargo”), which was amended pursuant to Amendment Number One dated July 23, 2012 (collectively, as so amended, the “Credit Facility”), on November 7, 2012, the Company was informed by Wells Fargo that loan availability on the Credit Facility was less than 12.5% of the maximum revolver amount on one or more occasions as of and after the fiscal quarter ended September 30, 2012, and accordingly, one or more events of default have occurred under the terms of the Credit Facility, including the failure to comply with financial covenants for the fiscal quarter ended September 30, 2012. The Company is currently in discussions with Wells Fargo regarding the asserted defaults and believes that it will reach an agreement with Wells Fargo with respect to such defaults. Wells Fargo has continued to fund requests from the Company after September 30, 2012 while Wells Fargo and the Company attempt to reach an agreement. There can be no assurance, however, that the Company will achieve an agreement with Wells Fargo.
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T

Tiktaalik

Member
I hope Relic doesn't fall apart. It's a great team with a long history of incredibly high quality products. Furthermore it would be awful for Vancouver's increasingly delicate game sector to take another hit.
 
Petrae

Petrae

Member
jrDev said:
Over/under months (weeks?) left before they shutter?
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Surprisingly, there's an air of confidence from some investors that Centerview will find a suitable buyer for THQ and avoid the worst-case scenario. I don't know of anyone that would do it within the industry, given that it's far less expensive to just let THQ die and pick the corpse clean a la Midway.

It will be interesting to see how investors treat this news during the next trading day.
 
M

medrew

Member
Nirolak said:
But if they had the money necessary to not breach their covenants they wouldn't end up in this situation, no?

I mean, all they would have to do to leave more than 12.5% of their loan amount open is to not draw that much money.

I'm assuming THQ isn't just sitting there going "Oh whoops, I forgot what my limit was!", though if they are, I guess that would explain a lot as to how the company got to where it was in the first place.
Click to expand...

loan covenants aren't about having money on hand. in fact given they are there for the lenders to protect their loans it is in some sense the opposite. the covenants are usually set around gearing. what this means is that THQ has probably breached the loan agreements over the level of shareholder funds. basically their equity has evaporated as i imagine in recent months they have written off assets and accumulated more liabilities.

A lot of control THQ is probably now about to be put in the hands of their banking syndicate, a standard term of banking covenants.
 
B

ban25

Member
Nirolak said:
But if they had the money necessary to not breach their covenants they wouldn't end up in this situation, no?

I mean, all they would have to do to leave more than 12.5% of their loan amount open is to not draw that much money.

I'm assuming THQ isn't just sitting there going "Oh whoops, I forgot what my limit was!", though if they are, I guess that would explain a lot as to how the company got to where it was in the first place.
Click to expand...

They are likely doing what anyone does before going bankrupt, drawing out the cash and holding it while they can, i.e. max out the credit cards.
 
UberTag

UberTag

Member
ChosenPredator said:
I'm interested because maybe WWE will finally go to someone who can make good wrestling games.
Click to expand...
This news is probably the best thing that could happen for WWE games to get good again.
No more complacency and an actual decent engine.

Just like losing some other dinosaurs <cough> Vince <cough> would be the best thing that could happen to the WWE to lose complacency in Creative booking.
 
shaowebb

shaowebb

Member
Volition, Vigil and Relic will probably be fine since they have a product worth buying them for, but Yukes is likely dead. They are pretty universally hated for their product and I don't think anyone would bat an eye at leaving them to crash so that their old licenses can be picked off.

I'm just being optimistic though since its no cheap trick to buy any studio up. Epic might pick up Vigil in my opinion. Their product is a good fit for growing the face of Unreal. Volition is someone I had pegged for an Activision acquisition, but it doesn't look like they will be buying studios from the stuff I've heard. Smart move would be for Microsoft or Sony to Snatch up Volition and Vigil to gain exclusivity over Darksiders and Saints Row. Sad fact remains that buying ANY of these up is a big deal and its touch and go if anyone of these studios will find buyers to save them in this market. The whole industry is restructuring and a lot of losses are coming up on folks. Studio acquisitions are getting tougher to do.

Here's hoping the folks land on their feet somehow.
 
F

Fjordson

Member
Excuse my business and financial ignorance here, but what happens if no one bothers to scoop up THQ? Do they basically just dissolve? Do all of their studios simultaneously shut down?
 
T

t26

Member
shaowebb said:
Volition, Vigil and Relic will probably be fine since they have a product worth buying them for, but Yukes is likely dead. They are pretty universally hated for their product and I don't think anyone would bat an eye at leaving them to crash so that their old licenses can be picked off.
Click to expand...

Yuke's released many games without THQ so they will be fine.
 
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