Midway Files for Chapter 11 Bankruptcy
While the gaming industry was surprised this morning by the announcement that Square Enix was looking to buy Eidos, one other major bit of gaming financial news today, unfortunately, isn’t such a surprise. This morning, Midway announced that it has filed for voluntary reorganization under Chapter 11 bankruptcy in the U.S. The company’s non-U.S. operations will continue with business as normal.
In its filing, Midway pointed specifically to the chain of events triggered by Sumner Redstone’s sale of the company, which ultimately lead to the company staring down the barrel of $240 million in debt. Despite being granted a short term reprieve, Midway believed it would be unable to pay the standing debt and was forced to file for the Chapter 11 protection. With Chapter 11 protection in place, Midway expects to conduct its business operations as usual. The company is currently seeking approval from the court for a variety of ‘First Day Motions’, which will allow it to continue with regular management duties.
“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 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.”
Although things seem pretty rough for Midway right now, gamers shouldn’t count them out by any means. The Chapter 11 protection gives the company a little bit of breathing room to restructure itself and to rebuild a strong foundation. Need proof? Back in 1996, Marvel Comics had filed for Chapter 11 protection after the bust of the comic industry. The company ended up turning itself around, getting out of bankruptcy four years later in 2000, and becoming a major force in the entertainment industry. Here’s hoping Midway can see a similar comeback.
