They really buried the lede on this one. Sure, Embrace paid back a bunch of money using proceeds from the sale of Take-Two. That’s pretty normal business. But:
The company is also moving €900 million of its debt into tabletop publisher Asmodee as part of its plans to split into three separate entities.
It sounds like they are about to jettison the rest of their debt using Asmodee. Embracer will walk away with whatever money they have made and Asmodee will end up being crushed under most of the debt Embrace used to make that money. Vulture capitalism at it’s finest.
Maybe, though if you think about it, the idea is basically:
Hey, we borrowed all this money to buy up lots of companies. But rather than pay it back ourselves, we are going to put all of that debt on this one company we also bought (probably with some of that debt), because thay actually make money.
It’s a shell game to allow Embracer to walk away with all the profits and never have to pay their investors back. If Asmodee manages to pay off the debt, that’s nice for them. Other than the fact that they will be hamstrung by servicing that debt, rather than re-investing in the company. If Asmodee folds and gets auctioned off in Chapter 7, that ends up having no material effect on the leadership of Embracer who made the decision to take on all that debt. Either way, Embracer is jettisoning all responsibility for the choices the management of Embrace made.
This sort of leveraged debt buyout, loot the company, then jettison the debt tactic has been used over and over to destroy otherwise profitable companies in the name of short term profit for vulture capitalists.
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Finally some news to make buying dozens of studios then laying off tens of thousands of employees all worth it
They really buried the lede on this one. Sure, Embrace paid back a bunch of money using proceeds from the sale of Take-Two. That’s pretty normal business. But:
It sounds like they are about to jettison the rest of their debt using Asmodee. Embracer will walk away with whatever money they have made and Asmodee will end up being crushed under most of the debt Embrace used to make that money. Vulture capitalism at it’s finest.
Didn’t they transfer the debt to Asmodee since that was the subsidiary that was profitable enough to handle it without going under?
Maybe, though if you think about it, the idea is basically:
Hey, we borrowed all this money to buy up lots of companies. But rather than pay it back ourselves, we are going to put all of that debt on this one company we also bought (probably with some of that debt), because thay actually make money.
It’s a shell game to allow Embracer to walk away with all the profits and never have to pay their investors back. If Asmodee manages to pay off the debt, that’s nice for them. Other than the fact that they will be hamstrung by servicing that debt, rather than re-investing in the company. If Asmodee folds and gets auctioned off in Chapter 7, that ends up having no material effect on the leadership of Embracer who made the decision to take on all that debt. Either way, Embracer is jettisoning all responsibility for the choices the management of Embrace made.
This sort of leveraged debt buyout, loot the company, then jettison the debt tactic has been used over and over to destroy otherwise profitable companies in the name of short term profit for vulture capitalists.