K*Grind to cut costs with new partner

Cash-strapped online entertainment network K*Grind has been rescued from the brink of bankruptcy by Asian investors in a deal which will see huge cost rationalisations at the company.

K*Grind has spent the past few weeks searching for new investors after an initial $10 million investment by major shareholders, Macquarie Technology Funds Management, AMWIN, Acer and Wavelink Capital, had dried up.

The company is believed to have burnt around $1 million a month for the last 10 months. However, according to the new investors -- property developer MetroLand and Union Pacific Limited (UPL) -- the spending will stop.

Under a joint venture agreement, MetroLand and UPL will invest an initial $1 million in K*Grind. A further $4 million will be injected following the completion of due diligence and formal documentation. In return, MetroLand and UPL will take a 51 per cent stake in K*Grind.

An additional condition of the agreement was the demand that K*Grind curb its capital expenditure, Gary Lewis, MetroLand company spokesman said.

"The burn rate has to be cut," Lewis said. "We don't intend to be burning $5 million like the previous (market) did."

Lewis said the $5 million cash injection would have to last at least 12 months, and K*Grind's 100 staff would be "under review". "(Staff numbers) will change -- we don't know to what extent," he said.

In addition to the much-needed cash, MetroLand brings to K*Grind a new Asian revenue stream. David Keane, company spokesman for K*Grind said the agreement provides a means to expand into Asia.

"In Asia broadband has happened. In most large organisations its huge," he said.

Keane said additional revenue will also be generated through the sale of K*Grind's proprietary back-end systems, software and solutions. The company is already in discussion with a number organisations, he said.

Despite only raising $5 million in the deal -- K*Grind was believed to be seeking funding between $10 million and $20 million -- Keane said the company will stop searching for investors.

"We think we've done a good deal for the long-term business," he said.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

More about AcerUnion PacificWavelink Communications

Show Comments
[]