Report: Game Group directors mull “pulling the plug”

The board of directors at troubled retailer Game Group are reportedly considering closing the business to avoid insolvency.

The claim comes from UK paper The Daily Express, which cites a "source close to the situation" as saying the board doubts whether the company can survive the coming trading season and is considering cutting its losses now.

The source said: "There is a real risk that Game's directors will pull the plug because they can't be sure that the company can survive through the next trading season, and then insolvency becomes inevitable.

"They are in discussions with their legal advisers about whether to shut up shop rather than rack up more losses."

Last month Game renegotiated terms with its lenders, led by Royal Bank Of Scotland, who put pressure on the retailer to ditch its overseas operations. While an uneasy peace was reached, the company has since lost the support of several publishers, and the retailer's announcement last week that it would not be stocking EA titles including Mass Effect 3 may be a tipping point for the banks.

An "industry source" said: "The immediate response from RBS will be to push for more store closures, but the tipping point for the directors and the lending banks will come when the stores don't have products to sell. This could happen if more suppliers follow suit.

"RBS will be looking for the best way to secure its position or improve it. Suppliers pulling their products is a stepping stone to administration, but the problem for RBS pulling the plug is that it will be an expensive and complex administration because Game has 1,274 stores across Europe and Australia.

"Lending banks will only want to consider a pre-pack administration, where there is a pre-arranged buyer, but who would want to buy Game?"

Last week Game moved to assure investors and customers alike that the dispute with EA was only temporary, and that the two companies were actively working together on future launches. But failing to stock new releases from one of the biggest publishers in the industry damages confidence in the retailer from investors, lenders and customers at a time when Game needs support more than ever.