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Starbreeze has returned to the Stockholm District Court to request a further reconstruction extension as it fights to remain solvent. The company hopes the additional three-month period – which gives the company until December 3rd, 2019 – will enable it to avoid insolvency.
“Starbreeze announced December 3, 2018 that the Starbreeze AB (publ) and five subsidiaries had file[d] for reconstruction, where The Stockholm District Court approved the application and assigned [an administrator],” the company said in a press statement.
The company has applied for two previous extensions, since December. The reconstruction plan states that Starbreeze will focus on its core business of internal game development.
Starbreeze recently revealed has closed the second period of the financial period with an EBITDA (earnings before interest, tax, depreciation, and amortization) loss of SEK 25.8m/$2.7m.
While the PayDay developer continues to sell off its assets – most recently Psychonauts 2 and 10 Crowns – and has bumped up net revenue by SEK 14.4m, the sale of the publishing rights generated SEK 137m, which accounts for a whopping 85.6 per cent of the company’s total revenue over that period. PayDay 2 continues to be the studio’s key income generator but that too has seen a significant drop, earning just SEK 14.5m compared to last year’s SEK 31m.
Starbreeze also confirmed plans to lay off a further quarter of its 240 staff. In a brief statement on the company’s official website, the firm said it had decided to make organisational changes “in order to make the organization more efficient and reduce costs”, resulting in 60 redundancies – primarily from its Stockholm office – by November 2019.
Skybound Games terminated its contract with Starbreeze Studios, stating the FPS zombie game based on Robert Kirkman’s The Walking Dead “did not meet [its] standards nor is it the quality that [it was] promised”. According to the company’s Q1 financials, Starbreeze continues to “disputes the termination” and is purportedly attempting to “come to a resolution” with Skybound.
After the “disappointing” launch of Overkill’s The Walking Dead, Starbreeze’s board of directors announced it was reviewing operations costs and implementing a program “to reduce costs and sharpen focus on core business”. The plan initiated a cost-cutting program, which included scaling back both internal and external development and was expected “to generate significant cost savings during the full year 2019 compared to 2018”.
The developer confirmed initial sales revenues from Overkill’s The Walking Dead were “lower than forecasted”, but attributed the revenue issues to “the share of sales in low-price countries, such as China and Russia, [being] significantly higher than expected”.
Consequently, Starbreeze filed for reconstruction with the Stockholm District Court in December 2018 following a “shortage of liquidity” that requires the company to “negotiate a long-term financial solution”. Starbreeze’s headquarters were then raided by police following reports of insider trading, leading to at least one arrest and the seizure of equipment, including computers and documents.
“The work with the reconstruction is continuing, full steam ahead,” Acting CEO Mikael Nermark said in its Q2 financial summary. “My number one priority and focus is securing the long-term financing for the company. In the short term, our finances are now secured as we have divested assets belonging to our non-core segment which has generated liquidity taking us to the second quarter in 2020. The work with the long-term financing is on-going with multiple parallel tracks, while we at the same time are negotiating with our creditors.
“With a strengthened cash position and multiple ongoing parallel tracks for future financing, we are hard at work to secure our future,” he concluded.
