The Mercury News offers a little background on why executives at the cloud-based gaming subscription service OnLive decided to pull the trigger last Friday. The company fired staff and decided to go with an "assignment for the benefit of creditors" (commonly referred to as ABC). The paper claims that the company owed $30 – $40 million dollars to various creditors and had little money to pay them anything. Failing to find a buyer (the end game according to insiders) and out of cash, the company faced an immediate shutdown of its services.
These new details come from Joel Weinberg, CEO of Insolvency Services Group. ISG was named the assignee in OnLive's ABC a few days before the company made its announcement to employees. ABC is often used as an alternative to various forms of bankruptcy under California state law.
"It was a company that was in dire straits. It only had days to live in terms of cash flow and the like," said Weinberg. "Something had to be done immediately or there would have been a hard shutdown, which would have been a disaster."
OnLive in its current form is backed by Lauder Partners, a venture capital firm owned by investor Gary Lauder. While Weinberg did not disclose how much Lauder paid for the assets of the company, he did tell Mercury News that he expects OnLive will be able to pay creditors 5 – 10 cents on each dollar OnLive owed to creditors.
Many of the OnLive's investors such as HTC and British telecom company BT have already said publicly that they expect to take a loss.
Source: Mercury News