Mastertronic applies for CVA to avoid Winding Up Order
Publisher to exit physical business, close HQ. 40% of staff to take redundancy
Publisher Mastertronic, which has been in business for 31 years, is being forced to apply for a Company Voluntary Agreement, or CVA, to avoid being issued a winding up order over loan repayments.
The business will be closing its Cambridge HQ, exiting physical retail and issuing redundancy notices to 40 per cent of workers.
In a note issued to GamesIndustry.biz and published on the company's blog, MD Andy Payne explained that pressures from the changing retail environment, including insistence on punishing write down agreements from retailers themselves, had led to increased financial pressures and concern from investors. With investor confidence waning, one loan was called in early, resulting in an untenable position for the UK business.
"These unexpected demands just piled more pressure on our cash flow," Payne writes. "A few months back, it was obvious that we needed to reach out to our creditors and seek time and patience from them. It has been both humbling and heartening to experience the support from all of our partners. They will remain nameless, they know who they are, but my word, it has been truly awesome.
"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."
Whilst this move will allow the company to continue to operate, Payne is under no illusions as to the force of its impact.
"Our CVA offer was formally sent to all our creditors on Friday 25th July. We are set to hold a creditors' meeting on 11th of August to put it to the vote and hopefully gain assent from the creditors. "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."