Tiger’s Gizmondo Europe Subsidiary Files for Bankruptcy
Tiger Telematics’ struggling Gizmondo Europe subsidiary filed for bankruptcy protection with the U.K.’s High Court at the close of business Fri., the company revealed in an SEC filing Mon. A large reduction in staffing is expected, but the company said “the action does not affect any other subsidiary of the company including its United States operations and sales under Gizmondo USA.”
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The company’s Gizmondo handheld entertainment system went on sale late last year in the U.S. after a European launch. The introduction came after several delays. The company hasn’t said how many units of the system have been sold, and not many retailers are now selling it.
Tiger said the filing “provides Gizmondo Europe with a moratorium in order to affect a financial restructuring of the business.” A court hearing will be held Jan. 31 to grant the administration order, it said. Meantime, Tiger said Gizmondo Europe was “immediately subject to protection of the court and all enforcement actions of creditors are automatically stayed.”
The company also said it plans to use funds from its recently announced $5 million bridge loan (CED Jan 18 p8) “to reinvest in the business in the U.K. and to restructure the overall debt of the European business.” Gizmondo Europe also said it already “made a reduction in payroll of approximately 50% of monthly staff costs during the week prior to the court application to reduce overall operating expenses of the business and significantly improve its prospects for a successful turnaround.” But the company didn’t specify how many employees lost their jobs or say how many staffers were still working at Gizmondo Europe or the company overall. It didn’t respond to a request for comment by our deadline.
Tiger said Gizmondo Europe “continues to trade as normal during this interim time period” but said it “anticipates a similar action in Sweden for the game subsidiary of Gizmondo Europe and for the company’s Gizmondo Studios, Sweden AB subsidiary within the next few days.” The company said it will “report shortly on the restructuring plans as they are approved,” as well as the status of the $50 million refinancing revealed in an SEC filing early this month.
The company revealed in the earlier SEC filing that Gizmondo Europe had “experienced severe financial pressures from various vendors as its cash flow has been unable to service the requirements.” It said “this has in part been aggravated by a lack of investor funding.” Tiger said it had also “been actively negotiating for further funds from debt and equity sources to assist the cash flow needs of Gizmondo Europe but there can be no assurances that this will be achieved.” Therefore, Tiger said, it “may be required to seek other alternatives for the Gizmondo Europe operations.” Although Tiger negotiated a $5 million bridge loan from an investment firm, the company said it “has not been able to draw down under the facility as of yet nor can any assurances be given that it will be able to draw down on the facility although it is working to achieve this on a daily basis.”
Tiger said in the same filing early this month that it combined 2 short-term loans made to Gizmondo Europe by shareholders into one note of Pounds 12.68 million due June 30, after an extension agreement was reached. One loan had been due Oct. 31 and the other Nov. 30 last year. The company said it pledged as collateral the patents and intellectual property rights of its Smart Adds product and the stock of its Smart Adds subsidiary. Tiger also said it “has been in preliminary negotiations for a major equity refinancing” but warned “no assurances can be given that it will be able to complete” it. The refinancing would include $50 million from Geneva and London hedge fund groups and an additional vendor credit debt line of about $25 million, it said.
Other recent setbacks for the company included the resignation of Carl Freer as chmn., announced 2 days before Gizmondo launched in the U.S. (CED Oct 21 p11). A Tiger spokesman a week later said the company accepted the resignations of Stefan Eriksson and Peter Uf “when it came to light that these individuals had not disclosed to the company criminal convictions in Sweden in the mid 1990s” (CED Oct 28 p9).