The GAME Group has been thrown a lifeline by its creditors in the City, which have renegotiated its lending terms to allow the company to continue to operate.
Announced in the early hours of this morning, the new deal will enable the chain to remain trading, with the executives confident that GAME will pass its covenant tests for the year ending January 31.
A projection of an $18 million loss for that year has been made, prior to the cost of tax and non-recurring items.
A statement from the Group to the City last night gave no concrete details of the new deal, but did indicate that credit lines had been extended.
"Further to the announcement earlier today, the Board of GAME is pleased to announce that it has now concluded discussions with its lending syndicate and agreed revised terms for its facilities.
"We're pleased to reach agreement with our lenders, but should be under no illusions about the challenges in our market or the hard work that is required to deliver our strategic plan."
Ian Shepherd, CEO, GAME Group
"Under the terms of the revised facilities, the Group has agreed to operate within lower limits of its existing facilities than was previously available. These revised facilities will allow the company to continue to trade. The Group has also agreed to provide an updated strategic plan for review, and approval in part, by the lenders. This plan will cover all aspects of the business's activities and strategy, including its overseas operations."
CEO Ian Shepherd made his own statement to accompany the release, expressing cautious optimism tempered by the need to remain realistic, saying: "We're pleased to reach agreement with our lenders, but should be under no illusions about the challenges in our market or the hard work that is required to deliver our strategic plan."
The rescue plan follows days of speculation over the future of the Group, following rumours of the loss of credit insurance, problems paying staff and stock difficulties. Whilst the stories about stock and payroll turned out to be false, GAME had confirmed that renegotiations with its credit syndicate were underway.
In the conference call accompanying its quarterly results yesterday, publisher EA seemed to make an oblique reference to GAME's financial difficulties when CEO John Riccitiello made reference to his company being "concerned with the financial condition of one of our major European retail partners, which could lead to both increased bad debt and lost sales."