Atari 2009 Annual Report Download - page 48

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
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the Group received €36.3 million in cash in relation to the sale by Atari Europe of its 66% stake in Namco Bandai
Partners.
During and prior to fiscal year 2008-2009 the Group made significant losses that have eroded its equity and cash
position. As of March 31, 2009 shareholders‟ equity amounted to a negative €17.5 million, taking into account the
€226.1 million loss posted for 2008-2009. During the year the Group‟s cash and cash equivalents decreased by a net
€62.2 million and net debt increased by €27.6 million.
In view of this situation the Group has undertaken measures to refocus its business on online activities and reduce
operating costs in order to return to operating income, generate positive cash flows and improve working capital.
These measures include (all references are to the consolidated financial statements):
 The acquisition in December 2008 of California-based Cryptic Studios Inc., which specializes in developing and
publishing Massively Multiplayer Online games (see Note 1.7). The acquisition was financed through an issue of
“ORANE-BSA” bonds in January 2009 (see Note 1.9). The management forecast for 2009-2010 includes the impact
of the launch of Champions Online – a game developed by Cryptic – scheduled for release in the second quarter of
the year.
 Sale of all of the Group‟s distribution operations in Europe and Asia to Namco Bandai, carried out in two phases:
34% in February 2009 and the remaining 66% in July 2009 (see Notes 1.5 and 22).
 Rollout as from June 2008 of a worldwide restructuring plan (Atari Transformation), together with an additional
restructuring plan in the fourth quarter of the year in order to limit the impact of falling demand from end-consumers
and facilitate the Group‟s transition to online business (see Note 1.4);
 Reorganization of publishing operations with the aim of maximizing revenue generated from non-online intellectual
property by monetizing licenses and entering into publishing partnership agreements. The first stages of this plan
have already been implemented, for example through the worldwide launch program for Ghostbusters: The Video
Game, which includes an exclusive agreement with Sony Computer Entertainment Europe for the launch of the
game on PS3 and PS2 in Europe and the PAL regions.
 Changing the Company‟s corporate name from Infogrames Entertainment to Atari. This move will enable the
Company to more effectively leverage the Atari brand by capitalizing on its worldwide reputation and its consumer
appeal – key drivers to implementing the Group's online, product and licensing strategies.
In order to ensure that it has the requisite funds to finance its operations in 2009-2010, the Company also:
 Secured an additional €15 million credit facility from Banc of America in the fourth quarter of 2008-2009,
expiring on December 31, 2009;
 Entered into negotiations to extend the expiration date of its €61.8 million Banc of America credit facility from
December 31, 2009 to July 2010 (see Note 28); In light of the negotiations that have taken place so far,
management considers it likely that Banc of America will grant this extension.
Based on the above-described measures and assumptions, as well as the forecast for fiscal 2009-2010 as approved by
the Board of Directors, management believes that the Group‟s financial resources – including the extension of the Banc
of America credit facility – will be sufficient to cover the Group‟s operating expenses and capital expenditure for the year
ending March 31, 2010.
On this basis, the Group has applied the going concern principle in preparing the consolidated financial statements.
Management believes that the assumptions it has used are reasonable. However, in view of the uncertainties inherent in
negotiating credit facilities and carrying out a strategic refocusing within a difficult economic environment, actual results
may differ from management‟s forecasts. Such a situation could limit the Group‟s ability to finance its recurring
operations and lead to adjustments in the value of its assets and liabilities, notably goodwill and intangible assets whose
total value in the consolidated balance sheet as of March 31, 2009 amounted to €34.9 million and €44.6 million
respectively.
Risks related to potential conflicts of interest
The Company is party to an agreement with Banc of America entered into on April 21, 2006 and to which eight
amendments have been made. Under the terms of the agreement Banc of America granted the Company a credit facility
currently amounting to €61.8 million. According to the agreement as modified by the seventh and eighth amendments
dated February 27, 2009 and March 31, 2009 respectively, the credit facility will expire on December 31, 2009. To the
Company‟s knowledge, the entire amount of this loan has been the subject of a sub-participation agreement with
BlueBay. Negotiations with Banc of America are currently in progress to extend the expiration date of this credit facility
until July 2010.
As of March 31, 2009 BlueBay was the sole underwriter of the Banc of America credit facility for which Banc of America
acted as an agent.