NEW YORK Feb 12 Midway Games Inc MWY.N said it and its U.S. subsidiaries filed for Chapter 11 bankruptcy protection, saying it could not repay looming debt triggered by the sale of Sumner Redstone's stake in the video game maker.
Midway, famous for its "Mortal Kombat" franchise, was obligated to repurchase $150 million in notes by today, a condition caused by a change of control that occurred in November when a group controlled by media mogul Redstone sold a 87 percent stake they held.
Redstone sold the stake to Acquisition Holdings Subsidiary I LLC, whose sole member is little-known investor Mark Thomas.
In documents filed in a a Delaware bankruptcy court, Midway listed assets of about $167.5 million and liabilities of about $281 million. The Chicago-based company warned last year that it might not be able to make the payments to its bondholders.
In the bankruptcy filing, Midway said it "anticipated it would be unable to satisfy" that obligation, and that the filing gives it time to explore alternatives.
"This Chapter 11 filing is the next logical step in an ongoing process to address our capital structure," said Matt Booty, Midway's chief executive, in a statement.
The move was not surprising, given the gloomy outlook from much larger rivals such as Electronic Arts and Take-Two, and Midway's thin roster of hit games, said Hudson Square Research analyst Daniel Ernst, who suggested that Thomas may eventually try to take Midway private.
"This private individual is basically taking it private, and relieving them of all of their obligations, and take the Midway brand and see if they can make something out of it at a later date," he said.
Lawyers for Thomas from the firm of Kramer Levin Naftalis & Frankel LLP in New York declined to comment.
Midway says it expects to conduct its business operations as usual under Chapter 11 protection. The action, filed in U.S. Bankruptcy Court in Delaware, does not include Midway's European operations, which will continue business as normal.
Shares of the Chicago-based company, which have lost more than 87 percent of their value in the past year, were trading at 16 cents on the New York Stock Exchange.
The case is In re: Midway Games Inc, No 09-10465, U.S. Bankruptcy Court, District of Delaware. (Reporting by Franklin Paul, additional reporting by Santosh Nadgir in Bangalore; Editing by Bernard Orr)