GII reports that UK games publisher Mastertronic announced that it is being "forced" to apply for a Company Voluntary Agreement (CVA) to avoid catastrophe over outstanding loans. In addition, the company announced that it will be closing its Cambridge, England headquarters, exiting the physical retail business it has been involved in for decades, and laying off 40 percent of its workforce. Mastertronic Managing Director Andy Payne detailed why all this is happening in a rather lengthy blog post on the company's official web site.
He cited the changing retail environment and the problems associated with it causing financial pressures and a lack of confidence from investors as the company's biggest problems at this moment in time. One investor called in a loan early, which Payne claims put the company in the untenable position it currently finds itself in.
"Then in early April, our majority shareholder from the Netherlands decided that they wanted to sell their shares and exit the business. That meant I needed to seek a replacement and rather quickly. There were and are people interested in investing in Mastertronic. We have built a business over the long term and one which has proved that it can adapt, time and again. These talks are on-going I am very pleased to say."
"However, one creditor decided to seek legal redress in recent weeks for monies owed to him against a loan he put into the business at the back end of 2013. This loan was being paid back slowly, but the creditor lost patience and decided that he wanted it all back immediately. That was all fair enough; the problem was that Mastertronic could not meet this demand. We simply did not have all the money. We were threatened with the issue of a Winding Up Order, something that is very, very serious and something we needed to protect ourselves against. We got a little extension in return for a payment against the loan, but we faced being officially wound up on Monday 21st of July at 9am, unless we met the debt in full."
"Consequently, we decided to take action to protect the business from this hostile threat. With great reluctance went into consultation with our staff last week in order to make redundancies. By Friday 18th of July, in advance of the said Winding Up Order, we had made our decisions, spoken to all creditors and agreed to enter into a Company Voluntary Agreement, commonly known as a CVA. We were set to defend ourselves the following Monday. At 15.55 on Friday 18th July we received communication from the creditor's solicitor granting us an extension to pay in full. Sadly, the die was cast. Staff had been informed that they would be made redundant and creditors had been informed of the action we had been forced to take as a result of this threat. Sometimes you simply cannot turn back time."
Payne goes on to say that the CVA offer was submitted to creditors on July 25 and a creditors meeting is scheduled of August 11.
"The plan we have put together allows us to cut all costs not directly attached to digital development and publishing of games. We will close our Cambridgeshire HQ, exit the lease, exit all physical goods activity and make 40% of our staff redundant, sadly. To all those who have supported us down the 26 years and 4 months that we have existed, I can only say a massive thank you, we will use your inspiration to adapt and build a more efficient business. To those loyal people we have made redundant and to those to whom we owe money, I can only say a heartfelt sorry, we will ensure we do our very best to clear the debts we owe as fast as possible. I can promise that the remaining team of awesome people at Mastertronic will give 100% to put things right and we will not compromise to set the record straight and do it the right way."