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
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
REBELLION!