RBS could make bid for stricken Game to salvage £45m it is owed

By DOMINIC JEFF
Published on 26/03/2012 00:00

ROYAL Bank of Scotland is exploring avenues to save collapsed retailer Game Group and salvage the money it has lent it as the computer games firm prepares to enter administration.

Game is due to appoint accountancy giant PricewaterhouseCoopers as its administrator after its shares were suspended from the London Stock Exchange last week.

PwC, which could take charge as early as today, is expected to make a large number of Game’s 6,000 staff redundant immediately in a bid to cut costs and create a viable business to be sold.

The retailer had issued a string of profit warnings in recent months as customers migrated to web-based rivals to buy games. The company made a loss of about £18 million last year.

Game’s position was made worse this year when top games designers including Electronic Arts and Nintendo stopped offering the latest releases to Game because of its well-publicised financial difficulties.

On Wednesday, the company admitted its equity was worthless and said: “In the short term, the board’s intention is that the business will continue to trade and discussions with lenders and third parties will continue.”

There appears to be plenty of interest in buying the better-performing stores as part of a slimmed-down business.

Bids are expected from American rival Gamestop and private equity firm Sun Capital Partners. OpCapita, which recently acquired Comet, has tabled at least one offer for Game already.

It has been reported that the stricken firm’s lenders, led by RBS, are also working on plans to buy the slimmed-down business out of administration.

Game has bank debts of more than £100m, including £45m owed to the taxpayer-backed RBS. Others, including Barclays and HSBC, are also thought to be owed tens of millions.

Yesterday sources close to the bank described talk of a bid as “speculation”.

But the banks are said to be unhappy at the deals being offered by the other suitors, which would not pay off Game’s debts in full.

With most analysts believing there is still a niche in the UK market for a high street-based games seller, the banks could yet decide that a direct intervention is the only way of avoiding an embarrassing write down of their loans.

The RBS-led consortium would most likely roll the existing debt into the new company, should it decide to buy it out of administration.

About 600 of Game’s 1,300 retail outlets are in the UK, including 52 stores in Scotland employing about 500 people. Administration will make it the UK retail sector’s biggest casualty since the demise of Woolworths in 2008.

The retailer had a £21m rent bill due over the weekend and a £12m wage bill at the end of the month. There is also £10m in VAT and £40m owed to suppliers. Administrators are expected to honour any wages owed.

Game is thought to be about £40m in arrears to its suppliers, such as those who refused to deliver new games such as Mass Effect 3, Street Fighter X Tekken and Mario Party 9.

Game Group is Europe’s biggest specialist videogaming chain and is the latest and largest in a number of retail failures in recent months.