Midway Games files Chapter 11 bankruptcy following repurchase obligation acceleration

By Caroline Salls

Pittsburgh, Feb. 12 - Midway Games Inc. and its U.S. subsidiaries filed for Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the District of Delaware after a Nov. 28 change in ownership triggered accelerated repurchase obligations on two classes of Midway debt, according to a company news release.

Midway said it did not expect to be able to satisfy the repurchase obligations.

"This was a difficult but necessary decision," chairman, president and chief executive officer Matt Booty said in the release.

"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 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. "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."

Midway has requested court approval to use the cash collateral of lender Acquisition Holdings Subsidiary LLC to fund its operations while in bankruptcy.

According to court documents, Midway had $167.52 million in total assets and $281.03 million in total debt at Sept. 30.

The company's largest unsecured creditors include:

• Indenture trustee Wells Fargo Bank NA, with a $75 million claim for the company's 6% convertible senior notes and a $75 million claim for its 7.125% convertible senior notes;

• Acquisition Holdings Subsidiary LLC, New York, with a $40 million unsecured loan claim;

• National Amusements, Inc., Dedham, Mass., with a $20.15 million subordinated loan claim;

• NBA Properties, Inc., Newark, N.J., with a $17.29 million license/royalty settlement agreement claim;

• Tangible Media, Inc., New York, with an $8.68 million marketing/advertising claim;

• Warner Brothers Interactive Entertainment Inc., Pasadena, Calif., with a $6.65 million license royalty claim;

• Artificial Mind & Movement, Quebec, with a $2 million external developer claim;

• Epic Games, Inc., Cary, N.C., with a $1.98 million license royalties claim;

• Walmart, Bentonville, Ark., with a $1.58 million customer credits claim; and

• Far Sight Technologies, Inc., Big Bear Lake, Calif., with a $1.28 million external developer claim.

Midway Games, based in Chicago, is a developer and publisher of interactive entertainment software for videogame systems and personal computers. Its Chapter 11 case number is 09-10465.

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