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THQ in Default on Credit Line

A THQ SEC Filing (Adobe Acrobat format) reveals more fiscal bad news for the publisher, following a a recent collapse of its stock. The filing reveals THQ is in default on a line of credit from Wells Fargo, leading to a delayed 10-Q filing, and a situation that sounds tenuous at best: "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." Thanks nin via Kotaku/Polygon.

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17. Re: THQ in Defaults on Credit Line Nov 11, 2012, 22:31 ViRGE
 
Nucas wrote on Nov 11, 2012, 21:28:
i'd heard rumors that THQ had ended up with the freespace license.. wonder if it's true? maybe volition can finally sneak it back and.. and..
The last time I checked it was still Interplay's. In fact it's one of the few things Interplay holds that is of any value.
 
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16. Re: THQ in Defaults on Credit Line Nov 11, 2012, 22:22 Jerykk
 
Will be interesting to see how they handle their existing projects. There's no way that they can fund them all. I suspect that the recent delays are just them buying time so they can shop out the games to other publishers. Actual development has likely been halted or cut down to really small teams.  
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15. Re: THQ in Defaults on Credit Line Nov 11, 2012, 21:28 Nucas
 
i'd heard rumors that THQ had ended up with the freespace license.. wonder if it's true? maybe volition can finally sneak it back and.. and..  
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14. Re: THQ in Defaults on Credit Line Nov 11, 2012, 19:41 Prez
 
nin wrote on Nov 11, 2012, 16:11:
At this point THQ's collapse sadly seems to be a foregone conclusion.

Makes me sad. They certainly didn't do everything right (but who does), but they've had more than a couple of really good games over the years.


Man, yeah. I cannot get on board at all with the conventional wisdom that their past transgressions means they deserve to die.

This comment was edited on Nov 11, 2012, 20:04.
 
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“The greatness of a nation and its moral progress can be judged by the way its animals are treated.”
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13. Re: THQ in Defaults on Credit Line Nov 11, 2012, 19:39 The Half Elf
 
How to make some quick money. Patch in a free roam into SR3, call it DLC, and whammo. If it worked for Arma 2 with DayZ it can work for SR3.  
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"I've never seen a feature like this before. It warms your ass. It's wonderful" -Walter Bishop
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12. Re: THQ in Defaults on Credit Line Nov 11, 2012, 18:36 Cutter
 
Ao long as whoever gets SR doesn't screw it up it's no big whoop.
 
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"The South will boogie again!" - Disco Stu
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11. Re: THQ in Defaults on Credit Line Nov 11, 2012, 16:19 killer_roach
 
NewMaxx wrote on Nov 11, 2012, 16:15:
killer_roach wrote on Nov 11, 2012, 15:12:
Your argument only holds water in the situation where THQ had a clearly outlined path back to profitability, which they don't. This default isn't a temporary setback - it's a symptom of further underlying issues. Without even a current accounts surplus on the horizon (much less an overall profit), it's only a matter of time before the sharks start to circle (if they haven't already).

Interesting. I wasn't aware I had made an argument. Not that I don't get accused of that every time I (or anybody else) posts here...

Actually, what I stated was that they are effectively one step away from bankruptcy. Everybody involved (THQ, Wells Fargo) are well aware of that - as I said, it did not come as a surprise. Therefore my statement that companies default all the time only suggests that news of such a default is absolutely meaningless with regard to whether or not they are going bankrupt, rather it is the particular company's circumstances that give the honest appraisal. Everybody is making the best of a bad situation by stringing it out, and if you want me to fall back to my original post's analogy, like the Byzantine Empire.

The crux of what you said earlier was that situations like this happen all the time. Technically, that is true.

However, in situations like this the likelihood of the defaulting party surviving in any meaningful sense are, given the fundamentals, practically nil.

THQ, as it currently stands, is not "effectively one step away from bankruptcy". With a default of this size, they are, for all intents and purposes, bankrupt in any meaningful sense apart from the formal filing.
 
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10. Re: THQ in Defaults on Credit Line Nov 11, 2012, 16:15 NewMaxx
 
killer_roach wrote on Nov 11, 2012, 15:12:
Your argument only holds water in the situation where THQ had a clearly outlined path back to profitability, which they don't. This default isn't a temporary setback - it's a symptom of further underlying issues. Without even a current accounts surplus on the horizon (much less an overall profit), it's only a matter of time before the sharks start to circle (if they haven't already).

Interesting. I wasn't aware I had made an argument. Not that I don't get accused of that every time I (or anybody else) posts here...

Actually, what I stated was that they are effectively one step away from bankruptcy. Everybody involved (THQ, Wells Fargo) are well aware of that - as I said, it did not come as a surprise. Therefore my statement that companies default all the time only suggests that news of such a default is absolutely meaningless with regard to whether or not they are going bankrupt, rather it is the particular company's circumstances that give the honest appraisal. Everybody is making the best of a bad situation by stringing it out, and if you want me to fall back to my original post's analogy, like the Byzantine Empire at the end.
 
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9. Re: THQ in Defaults on Credit Line Nov 11, 2012, 16:11 nin
 
At this point THQ's collapse sadly seems to be a foregone conclusion.

Makes me sad. They certainly didn't do everything right (but who does), but they've had more than a couple of really good games over the years.

 
http://www.nin.com/pub/tension/
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8. Re: THQ in Defaults on Credit Line Nov 11, 2012, 15:55 Prez
 
At this point THQ's collapse sadly seems to be a foregone conclusion. I don't remember any company in any industry recovering from a death spiral such as this (without the help of a bailout anyway - too bad for THQ that they don't make crappy cars or bad loans ). I just hope that the properties (and the teams responsible for them) get scooped up post haste.

This comment was edited on Nov 11, 2012, 16:03.
 
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“The greatness of a nation and its moral progress can be judged by the way its animals are treated.”
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7. Re: THQ in Defaults on Credit Line Nov 11, 2012, 15:48 killer_roach
 
ASeven wrote on Nov 11, 2012, 15:23:
This pretty much. At the rate events are happening I'm even starting to question if THQ won't publicly declare bankruptcy before the end of the year.

That credit line they defaulted on was $50 million... their market cap is just under $10 million, and only because the stock's actually come up a bit off its lows (at which point, around mid-week, they were about a $7.5 million company - or about 1/550th the market cap of EA, or 1/1500th(!) the size of Activision Blizzard).

Short of trying to sell IP and/or studios, I don't see how they dig themselves out of this hole, especially considering their recently announced delays. And even that likely won't be enough to do anything beyond get them past the short run.
 
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6. Re: THQ in Defaults on Credit Line Nov 11, 2012, 15:35 Wildone
 
GOOOD GOD! THIS HAS BEEN GOING ON SINCE 2008!!!!!!!!!!!!!!!!!!!!!!!  
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5. Re: THQ in Defaults on Credit Line Nov 11, 2012, 15:23 ASeven
 
killer_roach wrote on Nov 11, 2012, 15:12:
NewMaxx wrote on Nov 11, 2012, 14:47:
Companies default all the time. Sometimes it's news, sometimes it's not, but of course they have to report it to the stock exchange. I don't think this was an unexpected event in any regard. There will be a restructuring/renegotiation of debt, and the commission of future milestones, at which point there might be another renegotiation, and so on.

The modern world of finance has its roots a thousand years back (feudal kings did this all the time), but to spare the public a history lesson, essentially imagine THQ as a nation-state who borrows money from a rich trade state so that it can field an army with the intent to expand its domain. It fails to meet this goal and is thus unable to pay as anticipated, but still is able to pay something and still seeks to eventually achieve its goals and avoid the alternative of bankruptcy.

Except THQ is hemorrhaging cash - they're losing money greater than their market cap on a quarterly basis, with no real pathway back to profitability. With a default comes likely downgrades to their credit rating as creditors worry about their ability to satisfy current debt obligations (if their debt instruments aren't C-rated already, they likely will be now), which likely will constitute increased costs to their debt service, further hastening their debt spiral.

Your argument only holds water in the situation where THQ had a clearly outlined path back to profitability, which they don't. This default isn't a temporary setback - it's a symptom of further underlying issues. Without even a current accounts surplus on the horizon (much less an overall profit), it's only a matter of time before the sharks start to circle (if they haven't already).

This pretty much. At the rate events are happening I'm even starting to question if THQ won't publicly declare bankruptcy before the end of the year.
 
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4. Re: THQ in Defaults on Credit Line Nov 11, 2012, 15:17 Closed Betas
 
THQ had the ability to overcome EA not too long ago, but with horrific titles such as Space Marines and other extremely poor work, lol no surprise here...  
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3. Re: THQ in Defaults on Credit Line Nov 11, 2012, 15:12 killer_roach
 
NewMaxx wrote on Nov 11, 2012, 14:47:
Companies default all the time. Sometimes it's news, sometimes it's not, but of course they have to report it to the stock exchange. I don't think this was an unexpected event in any regard. There will be a restructuring/renegotiation of debt, and the commission of future milestones, at which point there might be another renegotiation, and so on.

The modern world of finance has its roots a thousand years back (feudal kings did this all the time), but to spare the public a history lesson, essentially imagine THQ as a nation-state who borrows money from a rich trade state so that it can field an army with the intent to expand its domain. It fails to meet this goal and is thus unable to pay as anticipated, but still is able to pay something and still seeks to eventually achieve its goals and avoid the alternative of bankruptcy.

Except THQ is hemorrhaging cash - they're losing money greater than their market cap on a quarterly basis, with no real pathway back to profitability. With a default comes likely downgrades to their credit rating as creditors worry about their ability to satisfy current debt obligations (if their debt instruments aren't C-rated already, they likely will be now), which likely will constitute increased costs to their debt service, further hastening their debt spiral.

Your argument only holds water in the situation where THQ had a clearly outlined path back to profitability, which they don't. This default isn't a temporary setback - it's a symptom of further underlying issues. Without even a current accounts surplus on the horizon (much less an overall profit), it's only a matter of time before the sharks start to circle (if they haven't already).
 
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2. Re: THQ in Defaults on Credit Line Nov 11, 2012, 14:47 NewMaxx
 
Companies default all the time. Sometimes it's news, sometimes it's not, but of course they have to report it to the stock exchange. I don't think this was an unexpected event in any regard. There will be a restructuring/renegotiation of debt, and the commission of future milestones, at which point there might be another renegotiation, and so on.

The modern world of finance has its roots a thousand years back (feudal kings did this all the time), but to spare the public a history lesson, essentially imagine THQ as a nation-state who borrows money from a rich trade state so that it can field an army with the intent to expand its domain. It fails to meet this goal and is thus unable to pay as anticipated, but still is able to pay something and still seeks to eventually achieve its goals and avoid the alternative of bankruptcy.
 
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1. Re: THQ in Defaults on Credit Line Nov 11, 2012, 14:10 Rossafur
 
"the Company"?
THQ is the infamous Company from Aliens?? I guess Ripley really screwed them pretty bad by thwarting their plans afterall...
 
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