The business, which employs 10,000 people, suspended shares this morning after saying there was no more equity value left in the company. Game has been hit by a slow down in the High Street and gamers increasingly turning to supermarkets and online stores like Amazon to buy new videos.
The company is appearing in court at 10am to request an administrator be appointed – expected to be Mike Jarvis of PwC.
By asking for a voluntary administration, Game will create a 10 day moratorium, which will protect it from creditors without formally going into administration.
The limbo period will give PwC the chance to complete a deal with a potential buyer. US retailer GameStop and turnaround funds OpCapita and Hilco are amongst the bidders. Game has 600 stores int he UK and the rest overseas. Rothschild has been helping to fund a buyer.
OpCapita, which last year bought electrical goods company Comet, has raised concerns in the past becuase of the charges it applies to companies it takes over. Sources say this leaves them more vulnerable to going into administration. The proposal tabled by OpCapita offered to settle the debts with lenders – led by Royal Bank of Scotland, as well as £40m of debts outstanding to suppliers.
RBS is owed more than £45m with Barclays and HSBC are amongst several lenders believed to be owed around £30m each.
Game needs to raise around £180m in time for its 25 March quarterly rent bill.
The company was locked in talks with suppliers and lenders to reach an agreement over the weekend.
However, insiders suggest the current management team has lost “credibility” with lenders. In February lenders extended £60m of new debt as part of a £130m overdraft lending facility that sat alongside £30m of long term bank borrowing.
The money was used to pay suppliers. But sources suggest management’s decision to pay suppliers different amounts infuriated those paid less.
Secondly, the money was paid out without first securing a universal agreement to defer monthly repayments, which left Game exposed to suppliers pulling out of agreements.
Electronic Arts, the maker of blockbuster video game Mass Effect 3, dropped its support for the company.
Only two years ago, Game Group made a profit of £90m.