Titus renegotiates debts, but cashflow problems loom

French publisher Titus Interactive has successfully renegotiated a significant part of its outstanding debts, convincing bondholders to accept extensions of the expiry dates of their bonds by well over a decade to 2020.

The publisher, which is the parent company of both Interplay and Virgin Interactive, says that it will trim its debt burden by more than 83 million Euro thanks to these changes - a major coup, given that its outstanding debts at the beginning of the year were 104.9 million Euro.

Under the terms of the deals, bondholders of a 2 per cent OCEANE convertible bond agreed to extend their expiry date by 15 years to 2020, in return for a massive change in the conversion ratio of the bond - from one share per bond to six shares per bond. The bondholders of a 2.5 per cent OCEANE bond will extend their expiry by 12 years, also to 2020, in return for a change from eight shares per bond to 16 shares per bond.

The deals will provide much-needed short term respite for Titus, but while they certainly delay (if not remove) a sword hanging over the head of the company, they will not assist the cashflow of the company, which is also a serious problem.

Financial constraints have delayed the release of a number of titles from the publisher, which in turn has led to a slump in revenues - figures for the first half of 2002/03 showed a 70 per cent decline in revenue. The company recorded a 72.2 million Euro loss in the first half as a result.

Already Titus has attempted to rescue this situation by stripping the assets of its subsidiaries - just about every key franchise owned by Interplay has now been sold. The road ahead looks difficult for Titus, with apparently insufficient cash to release titles or fund further development, and no obvious financing routes open to it. Being bought out by a larger industry player looks like the best hope for the group - but whether it has anything worth buying is another question.