Struggling game publisher THQ said it is in talks with Wells Fargo to resolve an “issue” on its credit agreement. THQ currently has $16.4 million borrowed on the credit facility, and it’s counting every penny.
During its last earnings call, THQ indicated it did not have enough capital to meet its goals of launching some big console games, and it has hired Centerview Partners to determine its “strategic alternatives.” In other words, it’s up for sale.
“As indicated in our quarterly report (10-Q) filed today, THQ is in discussions with Wells Fargo to resolve an issue with regard to our credit agreement,” THQ president Jason Rubin said in a statement. “We believe we will reach an agreement on this matter with Wells Fargo. The issue stems from a relatively small amount borrowed against the credit facility in mid-October 2012, which was subsequently repaid in full. THQ currently has $16.4 million outstanding on its facility, which is unchanged since we released second quarter earnings.”
Last week, Rubin said he had evaluated three announced games in the pipeline and found them wanting. He asked for changes that would result in a two-month delay in publishing the games, including Company of Heroes 2, South Park: The Stick of Truth, and Metro: Last Light. As a result, THQ won’t have all of these games coming out and producing revenue as expected. THQ decided it would no longer issue earnings guidance going forward until it resolves its future.
THQ said earlier it has $36 million in cash but has borrowed $21 million on its credit facility, resulting in net cash of about $15 million. It has been losing close to that amount on a quarterly basis, with the latest loss at $12 million in the second fiscal quarter ended Sept. 30. THQ’s share price is at $1.13 a share, down 4.7 percent from a day ago. That gives it a value of $7.7 million. That is extremely low for a company that has $400 million or so in annual sales.
And it suggests investors have lost confidence