Mastertronic lays off nearly half its staff as it seeks insolvency protection

The original Mastertronic actually disappeared in the mid-90s, but it was reborn in 2004 when one of its co-founders, Frank Herman, helped negotiate the purchase of the name from Sega. Sadly, the UK-based games publisher, now known as the Mastertronic Group , is once again facing a bleak future, as it has announced plans to close its headquarters, lay off 40 percent of its staff and completely exit the business of publishing physical copies of games.

Mastertronic Managing Director Andy Payne revealed the news in a lengthy blog post on Develop , in which he acknowledged that the company has been suffering cash flow problems that came to a head when one of its creditors demanded repayment in full on a loan from 2013. Unfortunately, Mastertronic could not meet that demand.

"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," Payne wrote. "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 9 am, unless we met the debt in full."

Faced with no other option, Mastertronic entered into a Company Voluntary Agreement (or Arrangement), an insolvency procedure that allows companies to continue opearting while they pay off their debts over a set period of time. The creditor who prompted the process actually granted Mastertronic an extension to pay off its debt three days before it was set to begin, but at that stage it was too late to halt the procedure.

Mastertronic's plan under the terms of the CVA will allow it to "cut all costs not directly attached to digital development and publishing of games," including the closure of its headquarters and the elimination of 40 percent of its employees. It won't actually enter into the CVA, however, unless and until it is approved by its creditors in a vote scheduled for August 11. Payne said he's confident the plan will be approved because Mastertronic's financial problems are the result of "unexpected historic debuts from the area we have exited," while its digital business is actually in very good shape.