THQ in financial crisis as $50 million debt still rises

THQ is known across the world as one of the top selling games companies. However, their business is hanging in the balance as money trouble is edging them closer to the brink of disaster.

So what is the problem exactly? Well, THQ is currently in default with the financial company Wells Fargo. The situation is that THQ owes Wells Fargo approximately $50 Million and the contract deadline is coming closer one day at a time. For the people in THQ, this is extremely troubling but the crisis is even worse for the smaller divisions that are a part of the company. If the head company can’t afford itself, the first thing it will do would be to disband and shut down the division companies. So if the worst comes to the worst, there will be no more Relic Entertainment, no more Vigil Games and no more Volition.

Is this the end for great companies such as Relic?

In the end, THQ may possibly have to choose between the three and we would no longer see games such as Saint’s Row, Darksiders or Warhammer.

According to recent statements by the company, “The loan availability was less than 12.5% of the maximum revolver amount.” and that Wells Fargo continues to fund their requests whilst the two companies discuss a settlement to their agreements.

THQ has been in deep water with Wells Fargo since 2011, where they entered their $50 million credit facility with them, borrowing almost half of that amount in the third quarter.  So it seems that the inevitable for THQ has begun.

However, with all debts and deadlines, they keep growing over time. THQ announced that they have issued a five day extension to their quarterly report, of which the delay has been caused from issues of the terms of agreement with Wells Fargo. They were expected to have solved the issue by the 13th of November. However, to combat this crisis, the company stated that they will “Seek out and evaluate alternative financial strategies” which included investment banking and private equity.

Delays to games such as Company of Heroes II and Metro:Last Light are also caused from the problem. Both games are expected to be released in the first quarter of 2013 and may provide some revenue for the company. However the delays may have cost the company too greatly and by the time the profits come in, the debt may have risen to an alarming level.

For the long term, as stated before, factions such as Relic Entertainment or Vigil Games may go out of business. If that situation does happen, many fans of games such as the Warhammer 40K or Saints Row series, or Homefront may not see another title to those names anytime soon. For the number of fans who are appealing for a third installment of the Homeworld franchise, the thin chance of it being put forward has now gone even thinner, if at all possible.

 

 

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James Nicholls

Hey there! What can I say, well, I am one of the editors of this site and I try to find out as much news as possible for a range of games, from the mainstream to the alternative. I tend to be a hardcore gamer, although I do like slow-paced, relaxing and creative games as well. On a more personal note, I like to draw either personally or professionally for a client. I also like to write stories and have a very big interest in aviation and music. (Although i can't play any instruments... yet.)

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