Telcogames Letter to Creditors

June 11th, 2008 by Arjan Olsder Posted in Companies & M&A | 7 Comments »

TelcogamesThough MED might bring the impression that they took over most of Telcogames, it looks like Menzies is still not finished. We managed to get hold of a big document outlining what is going on.

Since the letter was received as an image PDF scan and is simply too comprehensive to copy by hand, we pasted some quotes and summaries below. Because of the nature of the PDF, we will not distribute it on the blog or via email. We will protect our souce.

Business history; Telcogames was founded in March 2007. By the end of 2004, the company accounted a loss of 32.911 GBP. In the second trading year, which ended in 2005, TG had a total loss of 315,265 GBP. In that same year, TG acquired shareholders in order to grow internationally. These are the guys that ran the German, Israeli and other offices. The value of these acquisitions was 35.231 GBP.

In 2006, the trade loss was at 238,435 GBP. This was the year in which they bought Fathammer. Between 1-4-06 and 31-12-06, TG lost 872,872 GBP. 930,300 GBP was invested in TG. On 1-8-07 TG bought Viva la Mobile, also in hopes to increase turnover.

In 2007, TG got into cash flow problems. Shareholders did not want to invest additional money for restructuring and nobody wanted to acquire the company in it’s current state. On 02-04-2008, TG went to Menzies for Insolvency advice. During a meeting on 10-04-2008, the company’s directors chose to put TG in administration in order to protect the creditors. That same day, Namco Bandai Networks Europe Ldt deposited a winding up petition for the amount of 91,496.48 GBP. Namco is one of the biggest creditors. On 17-04-2008, the joint administrators Jason Godefroy and Paul Clark where appointed. They are both still investigating the events leading to the administration.

In regards to the mission of the administrators, they expect to wind up the company. That would be the most likely situation. “there will a distribution to the secured creditor, RBSIF, and there may be a distribution to preferential and non-preferential creditors. In addition, preferential and non-preferential claims have been minimised as a result of selling the business as a going concern.”

Progress to date
The joint administrators chose to keep the company operating in order to keep it interesting to be acquired. This would maximise returns for the creditors. It would also avoid a situation where contracts where cancelled based on the company being insolvent. That would quickly devalue the company.

In order to prepare the company for sale, Menzies hired Hilco Enterprise UK Valuation Services LLC in order to determine the value of TG. Also, the parties known to the administrators that expressed interest in (part of) TG where contacted by the administrators (12 in total). On 22-04-2008 all shareholders and creditors received a letter outlining the possibilities. Following the letter, the situation got widely known in the industry and featured on a number of industry websites (we would have loved to be named here). Following this, 33 parties displayed interest and 20 of them signed the non-disclosure agreement.

As operating TG costs Menzies a lot of money, the deadline for offers on the company was set at 25-04-2008 By then 4 offers where received including one from the management. Because of the small number of proposals, the deadline was moved to 29-04-2008. No new offers where received, but the management did renew their offer significantly. Also, one offer was withdrawn due to the amount of debts in the Swedish subsidiary. The management was chosen as the best offer and so TG was sold on to MED. The sale was finalized on 14-05-2008.

MED paid in total 150,000 GBP for the business and assets. 20,000 GBP was payable to the company on completion with a further 30,000 GBP payable within 5 days of completion. Both amounts where received and the remaining 100,000 GBP s payable in a deferred sales consideration basis with instalments due on the first day of every month commencing 1-6-2008 until 1-11-2008. The instalments are 20K, 20K, 15K, 15K, 14K, 16K. At the time of writing of the letter, the first payment was already late. Next to the installments, MED needs to pay 7% of the monthly gross margin on the 19th of every month for 12 months.

The reason to go with the offer from MED was that;
MED offered the largest element of unconditional cash, not based on trading performance
MED would pay for the administration period costs (17-4 till 14-05) which was 35K GBP
Hilco valued the company at 74K GBP, so advised the sale
Employees would transfer to the new company, minimising preferential creditor and employee claims
MED offered assistance in collecting debts toward Menzies
Contracts with suppliers and customers where terminated on a daily basis, only a personal approach could save this.
Under the terms of the offer, MED offered a debenture to the company as security for the deferred consideration.
In addition to the debenture, personal guarantees in respect to the deferred consideration were obtained from the directors of MED.


At 17-4-2008, the debts of TG toward RBSIF was 183,619 GBP with outstanding book debts of 288,518 GBP. RBSIF will be collecting those book debts. At the time of the letter (6-6-8), 96,326 GBP was collected. For those claiming their debts, use the form below.


At the time of administration, the non-factored book debts accounted 343,354 GBP. Active Receivables Management, a sister company to Menzies, will collect these. To date they managed to get hold of 2,627 GBP. MED paid 2,307 GPB for IT equipment and other inventory which was more then Hilco expected to receive. Menzies also reviews the possibility of submitting a VAT Bad Debt Relief Claim as well as a Corporation Tax Terminal Loss Relies Claim.

Menzies also received concerns in regards to the conduct of the directors. This conduct is under investigation. Also some transactions prior to the administration period are under investigation by Menzies. The joint administrators would love to receive proof of misconduct.

Menzies expects to be able to receive enough money to pay the preferential creditors. These are the employees. The non preferential creditors claim in total 2,097,678 GBP of which Namco Bandai claimed the biggest amount; 97,857. There may be enough realisations to enable a distribution to the non preferential creditors.




We didn’t copy all creditor information as it’s just to much, but we do see interesting names on the lists like former SEGA Mobile head Darren Newnham as well as companies like Elkware and even some guy called L MacDonald… What about Ollila Konsult and even my old employee, Overloaded, seems to be finally receiving money.




Something missing in the history is Magic Studios. The developers of Smartphone games that also went down under the TG regime.

In accordance with Paragraph 51 of schedule B1 of the Insolvency Act 1986, a creditors meeting has been planned at Menzis Corporate Restructuring 43-45 Portman Square, London, W1H 6LY on June 24th 2008 at 10:00 am (I guess they expect the meeting to take pretty long). The letter doesn’t say if Lewis MacDonald will be present. Since it’s in London, I guess it would be nice if Tim Green from ME-Mag would manage to get into the meeting and report about it. For me, it’s too far away.

    7 Responses to “Telcogames Letter to Creditors”

    1. Dave Lister says:

      Ok, so what we are seeing here in raw base form fact now is a company that was never profitable from day one really.
      Why would anybody with even half a damaged brain wish to continue a new business form one with such bad previous form is beyond me?
      I would’nt – nor would like to be a shareholder in it either.
      The poll here suggests also they are doomed anyway and the restructure cash would been better spent paying of their creditors and not starting a new business.
      I think there on a hiding to nothing personally unless the rabbit hole goes deeper with the ops and funny handshakes become involved at masonic level.
      I don’t want to know as that would be pretty much criminal.

    2. Mark Ripley says:

      “At the time of writing of the letter, the first payment was already late.”
      I’m sure there’s a lot of people here who won’t be surprised to hear that!

    3. For the public record I personnally actually calculated this morning from the DPR reports I received from Telcogames from start 2007-5 to 2008-02 (after which they stopped coming) the grand total of UK

    4. John says:

      I’m 99% sure that these figures do not include uninvoiced amounts to Telcogames for unreported downloads in the UK, for their 2 main channels Orange and o2. The outstanding figures here for many partners should be much higher. Interesting to note as well that the directors of the new Phoenix were all paid up, funny that.

    5. John Bridges says:

      I’d concur with John above – looking at the amount outstanding to us its considerably short.
      I would also point out that although the Creditors list contains debtors – the list very explicitly does not contain any major operators as Debtors – where are O2 and Orange etc – plus all the operators such as Telefonica Brazil etc which I see on my reports – or Hutch 3G ???
      Finally – Arjan – Namco aren’t the biggest creditor – that title goes to EA with over

    6. John Bridges says:

      Having chased Menzies it appears the discrepancy between the published Creditors and what some of us know is outstanding is because …
      The (former – that’s a joke) directors of Telcogames prepared the Creditors list with outstanding sums.
      Yet another sign of their willingness to bend the truth.

    7. Arjan Olsder says:

      John, we asked information about the payments at Orange PR. The guys there say they “don’t comment on legal issues…”

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    Arjan Olsder is the Vice President of Pixalon Studios. Opinions expressed on this publication do not have to represent those of Pixalon Studios.


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