Geek and gaming culture subscription service, Loot Crate, has filed for bankruptcy.
Following a definitive agreement for the sale of substantially all of its assets to Loot Crate Acquisition LLC, Loot Crate filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code, stating it will formalise the terms of the agreement “later this week”.
In a press release, the company says it “has taken significant steps toward financial health by reducing costs, capital expenditures and working capital needs, and looks forward to the benefits of new ownership”, but despite struggling for 18 months, a sale “is in the best interests of all parties”.
“We have worked diligently to overcome challenges with our capital structure, along with legacy issues the Company has been struggling with for the past 18 months. We are very pleased with our progress from an operational efficiency standpoint, however, the company still faces liquidity issues,” said Loot Crate’s Chief Executive Officer Chris Davis. “After careful review of a wide range of available options, management determined that a sale of the Company is in the best interests of all parties, including our valued Looters (customers) and employees.”
Davis confirmed “daily operations will continue as usual, unique and exciting fan items will be purchased, crates will be shipped, and all aspects of the business will go on as before the Chapter 11 filing”, and assured employees they will “continue to be paid as usual during this transaction”.
“This transaction represents good news for our employees, our customers, and our other constituents,” Davis added. “It will provide Loot Crate with greater access to the financial resources necessary to continue to prosper and grow. By utilizing the Chapter 11 process, we are able to ensure an expedited and orderly transition.”
Gizmodo reports, however, that just 60 employees remain at the firm after 50 staff were reportedly laid off just days before the bankruptcy announcement. This is on top of 150+ staff affected by prior redundancy rounds in July 2019, 2017, and 2016.
Former anime senior community manager Shawnee Hale left the company in November, but now reports via Twitter that these employees were let go “with no severance and no warning”.
“The layoffs happened very last minute, with everyone’s final check’s being hand cut/printed in office, and for the first time in many years that I can recall, not a single employee was granted a cent of severance pay,” added former technical director Chris Darbro, who was personally affected by the layoffs, via Twitter (thanks, Gi.biz). “Severance pay had been an established norm over the years, and many people (myself included) were counting on that in the event something happened to cause another layoff, etc, to help keep the bills paid and such.
“There’s been a lot of speculation that the reason for that was those who put this layoff together knew the company would be filing bankruptcy, and that they did this knowing former employees couldn’t pursue legal action because of bankruptcy protections. Is this how and why this went down the way it did? I don’t have the ability to say, but I can see the sense in it from those involved in making the decision who likely were apathetic to the employees that would be lost.”
Davis concluded that Loot Crate has now received a commitment for “up to $10 million in new financing” from Money Chest. These funds, along with ongoing revenue from subscriptions, will be used “to maintain normal operations”.