New Owner: Midway Hemorrhaging Cash

March 3, 2009 -

Do you get the feeling that Midway's ongoing bankruptcy drama isn't going to end well?

Reports yesterday indicated that executives planned to either structure a reorganization or sell off the company's only major IP asset - Mortal Kombat. Guess which one of those will be easier to do.

But a filing by Midway's new owner seems just as alarming.

GamePolitics readers may recall our February 15th exclusive report on allegations of sleazy insider dealing in the Midway affair. At the time, some Midway creditors wondered who new owner Mark Thomas was and how he was able to purchase Midway from media mogul Sumner Redstone for a mere $100,000 in November.

Thomas, through his shell corporation, Acquisitions Holding Subsidiary, fired back in U.S. Bankruptcy Court on Friday. Midway, says AHS, is hemorrhaging cash and Thomas wants his investment collateral protected:

[Midway has] an immediate need to access and use AHS's Cash Collateral. Nor can it be disputed that, based upon the Debtors' 13 week forecasted Budget, [Midway is] hemorrhaging cash at an alarming rate. Indeed, the [Midway] Budget indicates that between February 9, 2009 and May 4, 2009, [Midway] will burn through approximately $12,392,598 in cash representing an approximately 75% depletion of its cash reserves...

 

The Objecting Noteholders have made several unsubstantiated and unsupportable accusations - none of which are true - regarding the relationship and transactions between Sumner Redstone and AHS' s principal Mark Thomas... each of those allegations is without merit... 

 

The Limited Objection is replete with unsupported and, frankly, irrelevant factual allegations regarding the relationship between Mark Thomas and Sumner Redstone...

We asked Wedbush-Morgan analyst Michael Pachter to comment on Midway's situation:

Unfortunately, their low cash position, high debt load, and unforgiving creditors place them in the position of having to generate cash at a bad time, and it's always easiest to sell the assets with the most value.
 
I think it's premature to say that they are dead, but fair to say that a [potential] sale of Mortal Kombat will weaken them.

DOCUMENT DUMP: The AHS/Mark Thomas objection...


Comments

Re: New Owner: Midway Hemorrhaging Cash

Hey, I know of a game idea that could help Midway!

 

MidWayWayWay!

Re: New Owner: Midway Hemorrhaging Cash

Having seen Thomas's response to the objection of the debtors, I think the picture is becoming more clear. To me, it seems that Redstone obviously had knowledge of Midway's "hemorrhaging" of cash, and realized that he had to sell off the company for pennies on the dollar. While it seems ludicrous to sell it for $100,000, it's also hard to properly appraise Midway's worth, as it was up to its neck in debt and was losing cash quickly.

Thomas essentially acquired, for the price of a hundred thousand dollars, a company on the verge of collapse. While he stands to gain in the long term (thirty million dollars is a ton of money, after all), it's undeniable that that payoff is still far in the future.

I don't see any way for Midway to get out of the red unless they drastically restructure and change their business strategy (e.g. Capcom or Atari). The Chapter 11 filing gives Thomas the flexibility to make adjustments inside Midway to turn it back into a viable company, while also guaranteeing a return on his initial investment should everything turn out alright.

Maybe it's dirty and reeks of insider dealing, but the thought of a class war is childish. The government and the Constitution doesn't guarantee a golden parachute for every citizen--just the opportunity to try to secure one.

 

Haethos

Economics

University of California at Davis

Re: New Owner: Midway Hemorrhaging Cash

This whole situation with Midway just reeks.  From what I've been reading, I think investors are right to wonder who this Mark Thomas guy is and the nature of this deal.  Combine that with Midway having been run so badly for so many years before this bankruptcy and I wonder if they can really be saved.

It is hard to take Thomas seriously when yesterday, it was reported that Midway set aside something like $3.75M in bonuses for executives as incentive to get Mortal Kombat sold while at the same time, they have been telling employees the company can't afford to pay out their accumulated unused time off.  The company's in bankruptcy largely due to these executives, there should be no bonuses paid to them whatsoever.  Selling MK or restructuring is their base job, it isn't something extra that should be bonuses.  But in the US executive culture right now, bonuses seem to be an expection anyway.

Parallax Abstraction
Ottawa, Ontario, Canada
blog.digital-lifeline.ca

Parallax Abstraction
Ottawa, Ontario, Canada

Re: New Owner: Midway Hemorrhaging Cash

>> But in the US executive culture right now, bonuses seem to be an expection anyway.

Yup, it's capitalism at its finest. "I'm gonna get mine and I don't care who gets screwed in the process." I keep waiting for the rest of the country to wake up and realize they're never going to be part of the 'financial elite' and start a class war. These guys keep walking away from ruined companies with millions of dollars while the rank-and-file are heading for the food banks and wondering if they are going to be able to keep their houses. It just makes me sick.

Re: New Owner: Midway Hemorrhaging Cash

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Andrew EisenNo but it is defaulting to a very low volume. Not muted though.11/20/2014 - 10:14pm
MaskedPixelanteIs anyone else experiencing this weird Youtube glitch where, no matter what you had the volume set at last time, it defaults to muted no matter what?11/20/2014 - 10:07pm
MechaTama31What was wrong with Remember Me? I liked that one... >.>11/20/2014 - 8:50pm
AvalongodI tend to see the violence and sexism issues as different. Historically we know that the violence issue is overblown. But sexism is real. Better representations of women in games WILL happen.11/20/2014 - 7:35pm
Andrew EisenAnd unless I completely missed it, there's nothing in there about "how Pokemon in general is sexist but you gotta look deep for it."11/20/2014 - 5:10pm
Andrew EisenSeriously, you're upset, irked and fearful over an opinion piece that suggests the Pokemon demo would be better with more options and a better-written female character? SERIOUSLY?!11/20/2014 - 5:07pm
MaskedPixelantehttp://gamasutra.com/blogs/PugetAlain/20141118/230420/Nearly_Ripped_off_to_death_by_a_publisher__Get_better_by_yourself_and_wait_for_justice_Maybe.php Topware screws over an indie studio because they can.11/20/2014 - 5:01pm
Andrew EisenAre you SURE you provided the right link?11/20/2014 - 4:59pm
prh99And yeah that sucks, especially when bonuses are tied to it, but that is more a problem with crappy publisher policies and scoring in general than any discussion on what may or may no be sexism in games.11/20/2014 - 4:59pm
prh99But no one is on their legislative high horse or on the litigation war path, for that matter. The biggest effect is that a reviewer might give it a lower score and drag down their meta critic ranking.11/20/2014 - 4:56pm
Wonderkarpyup11/20/2014 - 4:51pm
Andrew EisenOh for crying out loud. Wonderkarp, I apologize for how rude this question is but seriously, did you actually read that article?11/20/2014 - 4:47pm
Wonderkarpits a stigma. people in power hear this crap and start getting on their legislative high horse. but I feel like we've already paid too much attention too a demo.11/20/2014 - 4:46pm
Andrew EisenHarm gaming how?11/20/2014 - 4:35pm
Wonderkarpcause it gets parroted around and is used by people to harm gaming like Jack Thompsons did with Violence. http://www.themarysue.com/pokemon-oras-sexism/ here's the article.11/20/2014 - 4:28pm
Andrew EisenNo idea why such an opinion would upset or irk you so I'd be interested in reading it. Got a link?11/20/2014 - 4:13pm
Wonderkarplook deep for it....reaching much. those kinds of people are what urk me.11/20/2014 - 4:07pm
WonderkarpI got upset the other day when a known feminist blog wrote a large article on how the demo to Pokemon Omega Ruby was Sexist cause you couldnt play as a girl. It was a Demo....who cares? but they went off on how Pokemon in general is sexist but you gotta11/20/2014 - 4:06pm
Andrew EisenHere's the panel that Sarkeesian quote from earlier comes from. Amazing what the proper context does, isn't it? https://www.youtube.com/watch?v=e0qxtKz2vZw11/20/2014 - 3:32pm
NeenekoSomething to keep in mind, we tend to look at physics as 'hard', but math and physics are trivial compared to soc/psych (I have worked in both), but FEELS like it should be simplier.11/20/2014 - 3:17pm
 

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