Administrator hopeful that buyer can be found for chain that has nearly 6,000 UK staff and 600 UK stores
The video-game specialist Game said it was shutting almost half its UK stores with the loss of more than 2,000 high-street jobs after administrators took control of the stricken chain.
The retailer had warned last week that administration was on the cards after it failed to agree a rescue deal with its lenders, led by the state-controlled Royal Bank of Scotland, who are owed �60m. This morning PwC was officially appointed as the administrator and its restructuring experts acted quickly, telling staff that 277 of its 610 UK stores would close by the end of this week, resulting in 2,104 redundancies.
PwC's Mike Jervis said: "The recent job losses are regrettable but will place the company in a stronger position while we explore opportunities to conclude a sale. Our priority is to continue trading the business as normal while we continue to pursue a sale."
Jervis said he was hopeful of finding a buyer for the Basingstoke-based company, with a number of parties interested in buying all or part of the group, which has a total of 1,300 stores including its operations in international markets such as Spain, France and Australia. Before its collapse, Game had about 5,500 staff in UK stores and its head office.
Game owes money to a group of banks that includes RBS, Barclays, HSBC and La Caixa and a "lender-led" rescue is one of the options being discussed. Banking insiders said a sale of the business was preferable but that a debt-for-equity swap was one of the scenarios being discussed.
Its US rival Gamestop is also thought to be interested in some of Game's international stores, while the turnaround specialists OpCapita, which tabled an earlier bid, and Hilco are also looking at the business.
PwC said the 333 stores not being closed, which employ 2,814 people, would continue to trade as normal. The Game website has been suspended, as has the Game reward and gift card scheme, and staff can no longer give refunds. The changes have resulted in angry exchanges in some stores, with upset customers and staff taking to Twitter and industry blogs as news of store closures leaked into the public domain. One employee told the trade website MCV: "I have had a mixture of supportive people ? and just idiots who think shouting at me and my staff who have narrowly avoided being jobless for at least the short term will solve their problem."
The crisis at Game was set in train earlier this year when worried lenders reduced the retailer's borrowing facilities. That meant the management team, led by the chief executive, Ian Shepherd, had to ask suppliers for help. However, major industry players such as Electronic Arts and Nintendo refused to support the chain, leaving the retailer with no stock of new titles such as Mass Effect 3 and Mario Party 9.
Last week Game's shares were suspended from the London Stock Exchange, its investors having previously been warned that their investment was worthless. The retailer's failure is expected to leave landlords and suppliers out of pocket. Its �21m quarterly rent bill fell due at the weekend, while suppliers are owed �40m. PwC is expected to honour the �12m wage bill that is due later this week.
In a statement, Game said PwC was called in after discussions with its lenders and third parties reached a dead-end: "This decision is taken after careful consideration and ceaseless interrogation of every possible alternative."
Shepherd has also stepped down, explaining to staff that with the administrator now in place, having two people trying to run the business was "confusing and a waste of money".
The high street continues to be hit hard by the slowdown in spending triggered by the credit crunch. Higher food and fuel prices mean Britons have been forced to cut spending on non-essentials with the resulting decline in sales putting severe pressure on retailers, particularly chains such as Game which have large store networks around the country. Game joins a growing list of retail casualties, following hot on the heels of last month's breakup of the value fashion group Peacocks, which resulted in more than 3,000 job losses. One in seven shops now lies empty, according to the latest figures from the Local Data Company.
Just as HMV, the last national music and DVD chain on the high street, has been hit by rising internet sales, downloads and competition from supermarkets, Game also suffered as gamers cut out the middle man. The industry trade body UKIE estimates that nearly �680m was spent on game downloads last year.
"Game has faced serious cashflow and profit issues over the recent past," said Jervis. High fixed costs and an ambitious international rollout had added to the firm's problems. But he was optimistic that there was still a place for Game on the high street: "We believe there is room for a specialist game retailer in the territories in which it operates, including its biggest one, the UK. As a result, we are hopeful that a going-concern sale of the business is achievable."
Source: http://www.guardian.co.uk/business/2012/mar/26/game-administrators-pwc-hopeful-selloff
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