A report in yesterday’s edition of The Express has claimed that the directors of struggling retailer GAME are considering “pulling the plug” on the entire business.
This is because many at the highest levels of the chain now fear that “insolvency has become inevitable” as it continues to negotiate deals with major publishers on a title-by-title basis.
And should further big releases follow Mass Effect 3’s lead in skipping the retailer, lenders might lose patience completely.
“There is a real risk that Game’s directors will pull the plug because they can’t be sure that the company can survive through the next trading season, and then insolvency becomes inevitable,” a source ‘close to the situation’ is quoted as saying.
“They are in discussions with their legal advisers about whether to shut up shop rather than rack up more losses.
“The immediate response from RBS will be to push for more store closures, but the tipping point for the directors and the lending banks will come when the stores don’t have products to sell,” said an industry source.
“This could happen if more suppliers follow suit.”
With a proposed buyout at the hands of GameStop seemingly in the balance thanks to a disagreement about the purchase of GAME’s Australian stores, it is perfectly possible that a pre-pack administration deal with GameStop positioned as the buyer is in the works.
“Suppliers pulling their products is a stepping stone to administration, but the problem for RBS pulling the plug is that it will be an expensive and complex administration because GAME has 1,274 stores across Europe and Australia,” a further source added.
“Lending banks will only want to consider a pre-pack administration, where there is a pre-arranged buyer, but who would want to buy GAME?”