Midway Games Files for Chapter 11

Midway Games, best known for the Mortal Kombat video games, has filed for Chapter 11 bankruptcy protection. The company does not expect to be able to pay back accelerated debt obligations.

The debt stems from media mogul Sumner Redstone's sale of a majority stake in the company. Midway had about $281-million (U.S.) in debt and $167.5-million in assets as of Sept. 30. Redstone, in December 2008, sold his majority stake in Midway – an interest of about 87.2 per cent – to a company led by private investor Mark Thomas. Midway Chief Executive and President Matt Booty has called the bankruptcy filing a “difficult but necessary decision.” “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,” he said. "Midway enters this process with strong underlying fundamentals, as evidenced by solid fourth quarter sales that exceeded expectations in spite of a challenging retail and general economic environment," Booty added. "Overall, Mortal Kombat vs. DC Universe sales are approaching two million units shipped, TNA iMPACT! has shipped approximately one million units, and our Game Party franchise has sold close to three million units in total." In December, Midway announced it was laying off 25 per cent of its work force, or about 180 people, and closing a studio in Austin, Texas, to cut costs. Midway expects that Chapter 11 protection will enable the company to conduct its business operations as usual. To that end, Midway is seeking approval from the court for a variety of First Day Motions enabling the company to continue managing its operations in the ordinary course.