Sega GameWorks U.S. arcade chain in liquidation

*Sega U.S. arcade unit in liquidation

*Liquidator says some stores will be sold, some closed

NEW YORK, April 27 (Reuters) - Sega Entertainment U.S.A. Inc, which runs the GameWorks U.S. arcade-restaurant chain, has shut down and will liquidate its business, according to a letter sent to creditors in the past week.

Sega Entertainment, an affiliate of Tokyo, Japan-based Sega Corp and Sega Sammy Holdings 6460.T, acquired the arcade-restaurant chain out of bankruptcy in 2005 in hopes of reviving the business, expanding Sega's United States presence and positioning it to compete with rivals like Dave & Buster's Inc [DAB.UL].

But Sega Entertainment, which runs about 15 arcade-restaurants, ceased operations on March 30, and has begun liquidating under a “general assignment for the benefit of creditors” proceeding in California, according to an April 22 letter to the company’s creditors.

“Some stores have been sold and some stores will close,” Richard Kipperman, president of Corporate Management Inc who was hired to run the liquidation, said in a telephone interview on Tuesday.

He said the liquidation affects only the U.S. unit in charge of the arcade locations.

A general assignment proceeding is a state proceeding often used as an alternative to Chapter 7 liquidation in U.S. bankruptcy court.

Sega Sammy said in February that it was facing “difficult business conditions” in its Japanese amusement centers as well, amid reduced consumer spending. It closed 51 centers in Japan over the past year.

GameWorks was started in 1997 as a collaboration between movie studios DreamWorks and Universal Studios and Japanese video game company Sega. DreamWorks left the partnership in 2001 and Sega GameWorks filed for Chapter 11 bankruptcy in 2004, selling its stores to Sega Entertainment in 2005. (Reporting by Emily Chasan)