Midway Games (MWY) fought the good fight, twice extending debt repayment deadlines, but ultimately extensions weren’t a solution. With time again running out, today the company gave in and sought the protection of Chapter 11 bankruptcy. (The full court document is embedded below)
Midway had been under the gun since December when then majority shareholder Sumner Redstone sold off his 87.2% stake in the company. Redstone’s firesale triggered early debt repayment clauses that put Midway on the hook for settlement of more than $150m in outstanding notes that otherwise wouldn’t have been due before 2025.
The default on those loans (which becomes automatic with bankruptcy), in turn, will trigger another $90 million in obligations to Redstone’s National Amusements that are shared with Mark Thomas, the buyer of Redstone’s shares through a participation agreement.
Working with Lazard since November, Midway had hoped to find a way to avoid this. Agreements reached with creditors pushed the deadline to February, but without a solution in sight, the company made what CEO Matt Booty called “a difficult but necessary decision.”
The company had a “solid” fourth quarter with shipments of Mortal Kombat vs DC Universe nearing two two million units and TNA IMPACT! nearing 1 million shipped, Booty said.
The company hopes to continue operating as usual through the bankruptcy, according to Booty, using it as a tool to ‘relieve the immediate pressure from [Midway’s] creditors and provide [the company] time for an orderly exploration of strategic alternatives.”
According to the bankruptcy filing which Metue has obtained a copy of and has embedded below, the company reports total assets of $167.5m and total debt of $281m.
Blank Rome, LLP is acting as the company’s lead bankruptcy counsel. Lazard will continue to advise as Midway’s investment bankers .
Some of Midway’s creditors affected by the bankruptcy beyond the holders of principal notes include NBA Properties, Warner Brothers Interactive Entertainment, Epic Games and major retailers. The following is a list of some of the claims from the bankruptcy filing. (a full table is in the filing at the bottom of this page or here as a PDF file).
|NBA Properties||$17,294,849||License Royalty|
|WB Interactive Entertainment||$6,654203||License Royalty|
|Artificial Mind and Movement||$2,000,000||Contracted Developer|
|Epic Games||$1,975,000||License Royalties|
|Walmart (NYSE:WMT)||$1,576,035||Customer Credit|
|Best Buy (NYSE:BBY)||$1,114,036||Customer Credit|
|Target (NYSE:TGT)||$934,156||Customer Credit|
(Embedded Bankruptcy Filing is Below Related Articles. Click the Icon in the Upper Right Corner to enlarge to full-page size)