Atari Loan Default Immaterial, But Troubling

Troubled video game publisher and developer Atari, the U.S. subsidiary of French-headquartered Infogrames, has announced that it has defaulted on financial covenants to lender HSBC Business Credit (USA) Inc. for the quarter ending December 31, 2005. According to Atari, the company had no significant balance outstanding under the credit facility, but this may prevent Atari from borrowing from it in the future, and the SEC filing exemplifies continuing concerns over the company's future. Parent Infogrames is faring slightly better, but also labors under long-term debt concerns and analyst worries about lack of major franchises. As recently as last August, disappointing results forced Atari to secure waivers for failure to comply with earlier HSBC loan conditions, and more recent financial results didn't help matters, with the firm losing $25.2 million for the quarter. A crucial announcement for the firm will be Atari's financial results for the fiscal 2006 third quarter and nine-month period ended December 31, 2005, which are now scheduled to be revealed on Thursday, February 9th. Much in the forthcoming Atari financial results depends on the performance of specific holiday titles such as the Shiny-developed The Matrix: Path Of Neo, which does not initially seem to have sold as well as previous franchise title Enter The Matrix for Atari. However, going forward, the company's launch of Driver 4: Parallel Lines, another of the firm's key franchises, in March will be particularly important for both Atari and Infogrames' future.