Since 2000, Mortal Kombat publisher Midway has been forced to finance its business on debt offerings and credit agreements as it sought to turn the tide of losses on game sales. Sadly, the losses continued to mount for the publisher, who is running out of sources of credit and the additional time needed to repay debt. Now it may be too much for Midway to handle, as the publisher's US operations today filed for Chapter 11 bankruptcy.
Last December, Viacom/CBS Corporation head Sumner Redstone sold his 87 percent stake in the company to a private investor for $100,000 USD, a mere $0.0012 USD per share. The move followed a delisting notice Midway received the month before from the New York Stock Exchange as its stock price fell below a dollar. This investor also assumed $70 million USD of Midway's debt as part of a $90 million USD loan agreement between the publisher and Redstone's holding company, National Amusements. With this change in ownership, holders of Midway bond issues were allowed to ask the publisher for full repayment, amounting to $150 million USD.
Midway has until February 19th to to pay back the full $150 million USD, but last December it was reported that the publisher may well be forced to default on such overwhelming debt. The company already missed the deadline to repay half these bond today. Should Midway default on the $150 million, National Amusements can also ask for the immediate repayment of their $90 million USD loan. And goodness, here we are at the publisher's filing for corporate financial reorganization.
"This was a difficult but necessary decision," said Midway Chairman, President and CEO Matt Booty. "We have been focused on realigning our operations and improving our execution, and this filing will relieve the immediate pressure from our creditors and provide us time for an orderly exploration of our strategic alternatives. This Chapter 11 filing is the next logical step in an ongoing process to address our capital structure."
Midway is hoping to continue business under Chapter 11 bankruptcy, with the goal of generating enough business to appease past due creditors... for the time being. The publisher is confident it can gain this approval from the courts, otherwise it faces having its assets sold instead.