'Mortal Kombat' creator files for bankruptcy
Midway Games Inc., the creator of the Mortal Kombat video-game series, sought bankruptcy protection from creditors, saying a change in ownership accelerated buyback requirements.
The company listed assets of $167.5 million and debt of $281 million as of Sept. 30 in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. Nine affiliates also sought protection.
"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," Chief Executive Officer Matt Booty said in a statement.
The bankruptcy comes as the video-game industry grapples with the slumping economy and the success of Nintendo Co.'s Wii. Electronic Arts Inc. and THQ Inc. have announced job cuts and studio closings to reduce costs. Activision yesterday issued a profit outlook below analyst estimates after U.S. consumer spending fell for six straight months through December.
Chicago-based Midway is a developer and publisher of interactive entertainment software for major video-game systems and personal computers.
The company has struggled to develop hit games for the latest generation of video-game consoles made by Nintendo, Microsoft Corp. and Sony Corp. Designing for the systems is more costly than earlier designs so it's hard to recover from a game that flops, said Mike Hickey, a video-game analyst for Janco Partners Inc. in Greenwood Village, Colorado.
Sumner Redstone, chairman of CBS Corp. and Viacom Inc., sold his 87 percent stake in Midway for $100,000 to investor Mark Thomas on Dec. 2 to help Redstone restructure debts that threaten his family business. Redstone's National Amusements Inc. is owed $20.1 million, court papers show.
"If you have a couple of misses, you drain your cash and then you exhaust yourself," Hickey said in an interview. "A lot of these little companies are victimized by the amount of capital that's required to develop next-generation games."
Activision Blizzard Inc., the world's largest video-game publisher, is a company that may bid for the rights to the "Mortal Kombat" property, said Hickey.
The 30 largest consolidated creditors without collateral backing their claims are owed a total of $256.2 million, court papers show. Wells Fargo Bank NA, as indenture trustee for noteholders, is listed as the largest unsecured creditor. The amount due under the notes is $150 million, according to court papers.
Midway's other unsecured creditors include New York-based Acquisition Holdings Subsidiary LLC, with a claim of $40 million; NBA Properties Inc., based in Newark, New Jersey, with a claim of $17.3 million; and Warner Bros. Interactive, with a claim of $6.6 million.
The case is In re Midway Games Inc., 09-10465, U.S. Bankruptcy Court, District of Delaware (Wilmington).