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OnLive had over $30 million in debt and 'only days to live,' says ABC fiduciary

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OnLive's mysterious assignee was Insolvency Services Group, whose CEO estimates that the company owed between $30 million and $40 million at the time the original company shut down.

onlive stock 1024 hq lytton
onlive stock 1024 hq lytton

Last weekend, cloud gaming startup OnLive shut down the company, gave away its assets and laid off all its staff, only to immediately build a new firm and hire a number of them back. Now, we're learning why: The San Jose Mercury News reports that OnLive owed between $30 million and $40 million in debt at the time. That's from the lips of Joel Weinberg, CEO of Insolvency Services Group, who has been revealed as the mysterious assignee in the insolvency transaction. "It was a company that was in dire straits. It only had days to live in terms of cash flow and the like," Weinberg told the Mercury News. "Something had to be done immediately or there would have been a hard shutdown, which would have been a disaster," he told the publication.

OnLive used an alternative to bankruptcy called Assignment for the Benefit of Creditors, or ABC for short, which requires the company to give all its assets to a third-party who is responsible for maximizing their value and getting creditors paid. In this case, ISG sold some of them back to the new OnLive, but the publication says that others were retained by ISG. Apparently, the transaction wasn't large: "Weinberg expects to be able to pay creditors only 5 to 10 cents on each dollar OnLive owed," the Mercury News reports.

Update: ISG CEO Joel Weinberg clarified to VentureBeat that the 5 to 10 cent figure is premature, and could end up being higher after the assignee renegotiates contracts with creditors.

Update 2: ISG also says some of the original OnLive's debts may be transferred to the new OnLive, which could reduce the amount that they claim.