Midway reaches waiver, forbearance agreement on 7.125% convertibles, extends put date

By Susanna Moon

Chicago, Jan. 5 - Midway Games Inc. reached an agreement with holders of its $75 million principal amount of 7.125% convertible senior notes due 2026 to extend their right to require Midway to repurchase the notes until Feb. 19, according to a press release and 8-K filing with the Securities and Exchange Commission.

The company entered into a waiver and forbearance agreement with holders of the 7.125% convertibles on Dec. 30.

As a result of a change in control, holders may require the company to repurchase their 7.125% notes at par plus accrued interest. But because the company expects to be unable to pay the repurchase price by the repurchase date, it requested holders waive their rights to put the notes and forbear from taking any action or otherwise exercise any rights under the notes as a result of the fundamental change.

The agreement with noteholders requires the company to pay all outstanding interest on 7.125% notes by Dec. 30 and to obtain by Jan. 14 a waiver and forbearance agreement from holders of 6% convertible senior notes due 2025 to waive puting their notes on Jan. 16.

Midway said it is in discussions with holders of its 6% convertibles to obtain a similar waiver and forbearance agreement extending the repurchase date for those notes triggered by the change of control to Feb. 19.

The company said on Dec. 4 that it was required to make a change-of-control offer for its 6% convertibles and its 7.125% convertibles. But it warned that it does not have the funds to repay all the debt.

The offer was to be made within 30 days as a result of a stock purchase agreement between sellers Sumner Redstone, National Amusements, Inc. and Sumco, Inc. along with purchaser Acquisition Holdings Subsidiary I LLC. On Nov. 28, Acquisition Holdings purchased all the Midway common shares held by the sellers, representing, collectively, 87.2% of Midway shares.

Also, on Dec. 1, Robert J. Steele resigned as a director of Midway.

In the offer, the company said it would pay par plus accrued interest.

Midway said it has received a notice from holders of each of the notes, adding that if all holders exercise their repurchase right, it would pay a purchase price of $150 million.

If this were to occur, Midway said it would not likely have the ability to satisfy that obligation and a failure to do so would be an event of default under the note indentures.

Under the purchase agreement, the purchaser paid a consideration of $100,000. MT Acquisition Holdings LLC is the sole member of the purchaser and its president is Mark Thomas.

Wells Fargo Bank, NA is the trustee.

On Nov. 20, a special committee of Midway's board retained Lazard to assist it in the evaluation of strategic and financial alternatives.

Midway Games, based in Chicago, is a developer and publisher of interactive entertainment software for videogame systems and personal computers.

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