Creditors Allege Shady Insider Dealing In Midway Bankruptcy
Creditors Allege Shady Insider Dealing In Midway Bankruptcy
February 15, 2009
When mystery man Mark Thomas acquired troubled game publisher Midway for a mere $100,000 last November, the deal raised more than a few eyebrows. It also raised questions like:
- Who is Mark Thomas?
- How could a company which owns popular franchises like Mortal Kombat and TNA Impact! be purchased so cheaply?
A motion filed on behalf of certain Midway creditors in U.S. Bankruptcy Court in Delaware on Friday makes those questions a matter of record and seeks to block the troubled publisher's move to spend collateral which obscure buyer Mark Thomas's Aquisitions Holding Subsidiary (AHS) put up as part of the Midway purchase.
The language of the motion, which seeks to protect the interests of holders of $150 million of senior Midway debt, comes close to alleging fraudulent insider dealing:
These cases... are tainted by highly unusual transactions by insiders of the Debtors... that, to put it charitably, require significant scrutiny... The rights and protections now offered [to AHS] are excessive and, under the circumstances, inappropriate...
The motion also digs into the shadowy relationship between former Midway owner Sumner Redstone (far left) and mysterious purchaser Mark Thomas:
[Midway] was dominated and controlled until November 28, 2008, by Sumner Redstone...
As recently as February 29, 2008, [Midway's] balance sheet was far less encumbered by debt... On February 29th, 2008 [Midway took three loans from Redstone-controlled entities]... just like that [Midway's] $15 million in outstanding loan indebtedness... ballooned to $90 million... to [Redstone]...
After the consummation of these Insider Loans... the Redstone parties sold for [$100,000] all of their [holdings] to... a very secretive individual named Mark Thomas... a person virtually unknown in the video game industry...
No disclosures ever have been made regarding Thomas or what, if any, relationship Thomas or his companies have with any Redstone Party... But it is safe to assume there must be a connection... given that Redstone essentially gifted [Midway for a mere $100,000]... to Thomas...
[Thomas stands] to reap an enormous, almost unprecedented windfall... if paid in full... the Thomas Parties will recover some 30,000% on their $100,000 investment within a matter of a few months... The Thomas Parties' return stands in stark contrast to the tens, or potentially even hundreds, of millions of dollars... that the Redstone-Thomas transaction may have stolen from [other creditors]...
Based on such language, it sounds like things could get very ugly, very quickly in the Midway bankruptcy proceedings. With that in mind, GamePolitics turned to Wedbush-Morgan analyst Michael Pachter for comment on the allegations:
The simple answer is that the unsecured creditors are alleging that the issuance of debt to Redstone secured by collateral was an “insider” deal. The secured debt has preference over unsecured debt in liquidation, meaning that Redstone’s successor (Thomas) gets paid first.
The filing goes on to allege that when Redstone sold his equity and secured debt to Thomas, the act was a change of ownership, and triggered rules that wiped out tax losses, accelerated default provisions on the unsecured debt, and impaired Midway’s ability to refinance.
The unsecured creditors apparently don’t like the fact that Thomas was a financial buyer, and has full control now. It is not in Thomas’ best interests to risk his big payday, and the unsecured creditors apparently believe that Thomas is going to force repayment of the debt as accounts receivable are collected.
In substance, they’re saying that Redstone orchestrated this, and they don’t like it. They are trying to keep Thomas from pulling cash out until they get a chance to reorganize, as that could accelerate and exacerbate Midway’s troubles.
GP: We'll keep GamePolitics readers posted on developments...
DOCUMENT DUMP: Grab a copy of the creditors' motion here.
UPDATE: The Chicago Tribune has a piece on the guessing game surrounding Mark Thomas's identity (via Kotaku).
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Posted 11/07/09 at 04:27pm
ZippyDSMlee: man I got alot of junk and dup files too >< god I need orginization...and no not the knee capping media mafia kind :P
ZippyDSMlee: man I got alot of junk and dup files too >< god I need orginization...and no not the knee capping media mafia kind :P
Posted 11/07/09 at 04:26pm
ZippyDSMlee: replaced :P
ZippyDSMlee: replaced :P
Posted 11/07/09 at 04:23pm
ZippyDSMlee: beemoh:hey its like 60GB porn,400GB anime 100GB games and crap I have took from all my DVDs, I hate waiting on dvds to install stuff..... oh and 40GB of my porn was in the found.000 folder...mostly corrupted.... least I got names of wut needs to be repa
ZippyDSMlee: beemoh:hey its like 60GB porn,400GB anime 100GB games and crap I have took from all my DVDs, I hate waiting on dvds to install stuff..... oh and 40GB of my porn was in the found.000 folder...mostly corrupted.... least I got names of wut needs to be repa
Posted 11/07/09 at 04:18pm
beemoh: @Zip: ...and you'd have to spend all that time re-downloading that porn?
beemoh: @Zip: ...and you'd have to spend all that time re-downloading that porn?
Posted 11/07/09 at 03:34pm
ZippyDSMlee: ggrrrrr......vista lost one of my hard drives and I had a heart attack thinking I lost 1TB of data....
ZippyDSMlee: ggrrrrr......vista lost one of my hard drives and I had a heart attack thinking I lost 1TB of data....
Posted 11/07/09 at 10:58am
JDKJ: Which could be explained by both (a) and (b).
JDKJ: Which could be explained by both (a) and (b).
Posted 11/07/09 at 10:56am
Austin_Lewis: JDKJ: You forgot C) the fact that, for some reason, every time he did something that would suggest he shouldn't be in the military, let alone an officer, higher ups ignored it or let it slide.
Austin_Lewis: JDKJ: You forgot C) the fact that, for some reason, every time he did something that would suggest he shouldn't be in the military, let alone an officer, higher ups ignored it or let it slide.
Posted 11/07/09 at 10:51am
JDKJ: Part of the problem is, I believe, that (a) the Army had a lot of time and money already invested in him and which they were unwilling to simply write-off and (b) an increasing need for the type of skills and services he provided.
JDKJ: Part of the problem is, I believe, that (a) the Army had a lot of time and money already invested in him and which they were unwilling to simply write-off and (b) an increasing need for the type of skills and services he provided.
Posted 11/07/09 at 10:48am
JDKJ: And that even if he was begging not to get cut loose, he was apparently a real good candidate for being cut loose, anyway.
JDKJ: And that even if he was begging not to get cut loose, he was apparently a real good candidate for being cut loose, anyway.
Posted 11/07/09 at 10:11am
JDKJ: @chada: And while Kennedy once noted that there's usually more than enough blame for everyone to get a slice, the possibility that the Army was unwilling to cut loose someone who was asking to get cut loose could be a factor.
JDKJ: @chada: And while Kennedy once noted that there's usually more than enough blame for everyone to get a slice, the possibility that the Army was unwilling to cut loose someone who was asking to get cut loose could be a factor.
Posted 11/07/09 at 10:07am
ZippyDSMlee: *noms on his feet*..nomnomnomnom*droooll* ...wuuutttttt uuu looking at?
ZippyDSMlee: *noms on his feet*..nomnomnomnom*droooll* ...wuuutttttt uuu looking at?
Posted 11/07/09 at 10:05am
JDKJ: I'm no psychologist, but I'm told that crazy people have a tendency to do crazy things.
JDKJ: I'm no psychologist, but I'm told that crazy people have a tendency to do crazy things.
Posted 11/07/09 at 10:03am
chadachada321: Whoops, was out of the convo for awhile. I do wonder what type of ammo he used etc, but the real issue is WHY he did it, not HOW
chadachada321: Whoops, was out of the convo for awhile. I do wonder what type of ammo he used etc, but the real issue is WHY he did it, not HOW
Posted 11/07/09 at 09:56am
JDKJ: But if it turns out that they actually did, they'll have Hell to pay.
JDKJ: But if it turns out that they actually did, they'll have Hell to pay.
Posted 11/07/09 at 09:45am
JDKJ: And I'd tend to rule out the possibilty of FN Herstal supplying restricted ammunition to someone merely because they're ordering it from a military base.
JDKJ: And I'd tend to rule out the possibilty of FN Herstal supplying restricted ammunition to someone merely because they're ordering it from a military base.
Posted 11/07/09 at 09:37am
JDKJ: I know you don't leave your gated community and get around much in dark alleys, so you may be surprised to learn that there's this thing called "the black market" where, if you've got enough money, ain't too much of anything which can't be bought.
JDKJ: I know you don't leave your gated community and get around much in dark alleys, so you may be surprised to learn that there's this thing called "the black market" where, if you've got enough money, ain't too much of anything which can't be bought.
Posted 11/07/09 at 09:36am
Austin_Lewis: Or, maybe he or someone else at the base ordered the SS190 from FN Herstal.
Austin_Lewis: Or, maybe he or someone else at the base ordered the SS190 from FN Herstal.
Posted 11/07/09 at 09:32am
Austin_Lewis: the hands of private owners. They run about 300 dollars minimum for a box of 50, and boxes of AP 5.7 are extremely scarce, mainly residing in the hands of Class III stores or individuals who for one reason or another got a demo box of it.
Austin_Lewis: the hands of private owners. They run about 300 dollars minimum for a box of 50, and boxes of AP 5.7 are extremely scarce, mainly residing in the hands of Class III stores or individuals who for one reason or another got a demo box of it.
Posted 11/07/09 at 09:30am
Austin_Lewis: There are other firearms that fire the 5.7. However, I too would like to know where he got the ammo and what kind was used. Maybe Hasan, planning not to live through this, went out and bought one the boxes of SS190 that are floating around in
Austin_Lewis: There are other firearms that fire the 5.7. However, I too would like to know where he got the ammo and what kind was used. Maybe Hasan, planning not to live through this, went out and bought one the boxes of SS190 that are floating around in
Posted 11/07/09 at 08:44am
JDKJ: And it isn't yet clear what type of ammunition Hasan used. It's strange that he purchased a gun but didn't purchase ammunition for it at the same place and time. Especially because the calibre required is peculiar to the actual gun.
JDKJ: And it isn't yet clear what type of ammunition Hasan used. It's strange that he purchased a gun but didn't purchase ammunition for it at the same place and time. Especially because the calibre required is peculiar to the actual gun.
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Game Politics and Game Politics logo are trademarks of the ECA.
Comments
Sounds like the shit is just about to hit the fan. Won't be pretty.
Very ugly might actually be an understatement.
Another question one might ask is "Was this legal?"
When the whole deal came about, I thought the same thing. How can you sell something for so cheap when it has several [hundred] million in debt and virtually had no means as to make and repay the debt in the time that it had? I, also, think that this is not just an inside job, but also trying to make a fast buck in a, largely, illegal way.
Another question is why they thought they could get away with this. Yes, Midway's debt and poor management have devalued it, but a hundred times more would have been a lowball offer.
Good to see corporate raiding is still alive and well.
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I LIKE the fence. I get 2 groups to laugh at then.
I thought it was $100K on top of Mark Thomas taking on all that debt. Which seems pretty reasonable given all the debt Midway's in. What am I missing here?
Pachter clarified it pretty well, I think.
The fear is that Thomas will get his money out first and the rest of the creditors will get screwed.
It also seems that, if Thomas (who is not a game industry person) only wants to get paid, then he will take the revenue that could go to rebuilding the company, leaving Midway nowhere.
Now when you look at these two possibilities, you have to wonder about the Redstone-Thomas relationship and how this plan got cooked up.
I hate legal jargon, so what they think that Redstone wasn't just desperate to get out from under all that debt? (With as much as he stood to lose I'd wanna shuck it off on the first guy I met too) I mean I guess it could be some kinda fraud thing but I figured Bankruptcy was just along the line of common sense since they couldn't play in time if they wanted to. I mean if he files Bankruptcy that'd buy them time to profit off the major titles wouldn't it?
well, there's no doubt that the people crying foul are pushing a position of their own. And you can bet Redstone/Thomas have tons of lawyers of their own. Ultimately, the court will decide.
As a gamer, what I'd be most concerned about is Thomas pulling all of the revenue out that he can get, leaving Midway a hollow shell. We've already seen last week that they sold off Wheelman, which was supposed to be a big release for Midway.
Michael, I'm sure, has done enough research to determine who Thomas is. The Georgetown connection will lead back to relationships with Redstone, CBS, etc. that explains a lot. Also.....Thomas is a divorce attorney who goes back a ways. Think about it.
Hopefully, if this is the BS it looks like it is, we'll see this kind of corporate BS become a felony to the parties involved and finally start jailing some of these assholes.
White collar crime can never be a felony, how else dose the goverment make money. :P
Gore,Violence,Sexauilty,Fear,Emotion these are but modes of transportation of story and thought, to take them from society you create a society of children and nannys, since adults are not required.
http://zippydsmlee.wordpress.com
So let's say that this Mark Thomas is associated with Redstone, and that the transaction was done in order to screw the creditors; what happens then? Are the creditors able to go after Redstone and Thomas, or are they stuck dealing with Midway? Are there any possible criminal charges that Thomas and Redstone should worry about? Is it possible that the transaction may be reversed?
So let's say that this Mark Thomas is associated with Redstone, and that the transaction was done in order to screw the creditors; what happens then? Are the creditors able to go after Redstone and Thomas, or are they stuck dealing with Midway? Are there any possible criminal charges that Thomas and Redstone should worry about? Is it possible that the transaction may be reversed?
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