New Owner: Midway Hemorrhaging Cash

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

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