Midway Games Files for Chapter 11

Midway Games Inc. said it filed for Chapter 11 bankruptcy protection, citing a debt crisis that was triggered by media mogul Sumner Redstone's sale of his stake in the videogame maker in Nov. Redstone's sale of his 87% stake to private investor Mark Thomas triggered a change-of-control provision on the company's convertible notes, allowing noteholders to demand their money back. Despite games like Mortal Kombat Vs. DC Universe, Midway has posted losses for several years. Chicago-based Midway, best known for its Mortal Kombat series of games, had warned it wouldn't be able to pay holders if they asked for repayment, which the company expect. CEO Matt Booty called the bankruptcy filing a difficult but necessary decision. He saod, "This filing will relieve immediate pressure from creditors & provide us time for an orderly exploration of our strategic alternatives." The company has reported annual operating losses since the fiscal year ended June 2000. It had debts of $337.3 million and $178.3 million in assets of as of Dec. 31, 2008, according to bankruptcy court documents.
The Chapter 11 filing in DE doesn't include the company's non-U.S. operations, Midway said. Midway hired investment bank Lazard Ltd. in November to help it cope with the debt issues. Then, in December, Midway said it would lay off 25% of its work force, close its TX studio & suspend development of several games as it looked to cut costs. Redstone lost hundreds of millions of dollars on his Midway investment as the stock plummeted last year. Midway expects to remain a presence in the videogame industry.