FATALITY!
by John Paczkowski
Posted on February 12, 2009 at 3:39 PM PT
It was inevitable, really. With $150 million in debt coming due on Feb. 19 and not nearly enough cash on hand to pay it off, Midway, the sinking ship of a game publisher responsible for Mortal Combat (and little else), has filed for bankruptcy.
Midway (MWY) blames its unfortunate situation on Sumner Redstone’s decision to sell National Amusement’s majority stake in the company in December. That change in ownership has apparently allowed him to make “substantial progress” on restructuring National Amusements’ debt, as Redstone said this morning. But it was disastrous for Midway as evidenced by today’s announcement.
“This was a difficult but necessary decision,” Matt Booty, Midway’s president, chairman and CEO, said in a statement. “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.”
Apparently, Booty wrote that last line without a hint of irony. But clearly it’s soaked through with it. Fact is, Midway hasn’t had a profitable year in nearly a decade. And given the somber outlooks of far more potent rivals like Electronic Arts (ERTS) and Take-Two (TTWO), and its anemic game catalog, this year will be no different.
