[Update: Insolvency Services Group CEO Joel Weinberg communicated that OnLive has not yet finished calculations on the total debt, as it is renegotating contracts with creditors; the 5 cents to 10 cents on the dollar figure is thus not accurate, and evidently, they will be paid more than that.]

As OnLive sought a bankruptcy alternative last week, it had an estimated $30 million to $40 million in debts to its creditors, according to the San Jose Mercury News.

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The cloud gaming firm had sought a buyer but couldn’t find one and faced an imminent shutdown of its services, Joel Weinberg, the CEO of Insolvency Services Group, told the Mercury News.

Weinberg’s firm is the assignee in OnLive’s alternative to bankruptcy, dubbed Assignment for the Benefit of Creditors. The process was set up under state law to bypass federal bankruptcy protection, which can take longer to adjudicate.

“It was a company that was in dire straits. It only had days to live in terms of cash flow and the like,” said Weinberg, whose firm’s role in the OnLive insolvency process is similar to that of a bankruptcy trustee. “Something had to be done immediately or there would have been a hard shutdown, which would have been a disaster.”

OnLive transferred its assets to ISG, which turned around and sold them to an affiliate of Lauder Partners last Friday. Proceeds from that sale will be used to pay creditors, who may get something like 5 cents to 10 cents on the dollar that they are owed.¬†Weinberg declined to say how much Lauder paid for the assets. We hear that OnLive owed thousands of dollars to the Prolific Oven bakery and a considerable sum — $123,727 — to Colt Group, a firm that helped it with trade shows. OnLive continues to run its game service, which uses web-connected data centers to run high-end games on low-end computers, under the new company, which is also called OnLive.

The large sum owed to creditors apparently explains why the company didn’t offer severance pay to 200 employees who lost their jobs.