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Categorized | Banks

Troubled Game Group nears rescue deal

Posted on March 30, 2012

There is fresh hope for Game Group this weekend, with the troubled video games retailer close to a rescue deal.

Three people familiar with the situation said a deal to buy Game out of administration was close. They said OpCapita, the private equity group that acquired electrical retailer Comet for £2 last year, was the frontrunner to acquire the video games retailer’s UK operations.

A rescue deal could come early next week. However, the situation remains fluid, with a consortium led by Royal Bank of Scotland and Barclays still evaluating keeping Game on the high street through a debt-for-equity swap.

People familiar with the situation said the complexity of a bank-led proposal, involving multiple lenders, meant a sale was more likely. OpCapita may also have an advantage over the other bidders as it first expressed interest in Game before it went into administration on Monday. It made an offer two weeks ago to acquire Game’s debt before administration, although this was rejected by Game’s banks.

GameStop, the US video games retailer is also thought to be interested in some of Game’s international operations. It was mooted as a potential buyer for some of the British shops although it was thought unlikely to pay a significant sum for the business.

A rescue deal could potentially bring hope to Game’s almost 3,000 employees in the 333 remaining stores.

Game admitted defeat after it was unable to pay a £21m quarterly rent bill, and PwC was appointed as administrator on Monday. PwC said it would close 277 stores with immediate effect, leading to just over 2,000 job losses.

GA Europe, the retail restructuring specialist, is supporting PwC in the continuing trading of Game as well as the store closure programme.

The collapse of Game was the biggest retail casualty since Woolworths in 2008. If it is rescued, it would also be the latest retail chain to be bought out of administration in a slimmed down form. Last month, Edinburgh Woollen Mill acquired the bulk of Peacocks after it collapsed in January.

However, it emerged earlier this month that OpCapita was looking to sell 60 of Comet’s stores.

Some analysts believe there is still a place for a specialist video games retailer despite the pressures on the market, including video gaming increasing moving online.

All parties declined to comment.