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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MaskedPixelantehttp://www.joystiq.com/2014/04/18/playstation-99-cent-sale-discounts-tokyo-jungle-super-stardust/ Weekend long PSN flash sale. So much stuff is 99 cents for the rest of the weekend.04/18/2014 - 5:59pm
Adam802http://www.polygon.com/2014/4/18/5627928/newtown-video-game-addiction-forum04/18/2014 - 4:14pm
Matthew Wilsonit is a video talking about why certain games/products/consoles do well, and others do not. he back it up with solid research.04/18/2014 - 3:56pm
Andrew EisenI'm not keen on blind links. What is it?04/18/2014 - 3:45pm
Matthew Wilsonthis is worth a whatch https://www.youtube.com/watch?v=MyXcr6sDRtw&list=PL35FE5C4B157509C904/18/2014 - 3:43pm
MaskedPixelanteNumber 3: Night Dive was brought to the attention of the public by a massive game recovery, and yet most of their released catalogue consists of games that other people did the hard work of getting re-released.04/17/2014 - 8:46pm
MaskedPixelanteNumber 2: If Humongous Entertainment wanted their stuff on Steam, why didn't they talk to their parent company, which does have a number of games published on Steam?04/17/2014 - 8:45pm
MaskedPixelanteNumber 1: When Night Dive spent the better part of a year teasing the return of true classics, having their big content dump be edutainment is kind of a kick in the stomach.04/17/2014 - 8:44pm
Matthew Wilsonhttp://www.giantbomb.com/articles/jeff-gerstmann-heads-to-new-york-takes-questions/1100-4900/ He talks about the future games press and the games industry. It is worth your time even though it is a bit long, and stay for the QA. There are some good QA04/17/2014 - 5:28pm
IanCErm so they shouldn't sell edutainment at all? Why?04/17/2014 - 4:42pm
MaskedPixelanteNot that linkable, go onto Steam and there's stuff like Pajama Sam on the front-page, courtesy of Night Dive.04/17/2014 - 4:13pm
Andrew EisenOkay, again, please, please, PLEASE get in a habit of linking to whatever you're talking about.04/17/2014 - 4:05pm
MaskedPixelanteAnother round of Night Dive teasing and promising turns out to be stupid edutainment games. Thanks for wasting all our time, guys. See you never.04/17/2014 - 3:44pm
Matthew WilsonAgain the consequences were not only foreseeable, but very likely. anyone who understood supply demand curvs knew that was going to happen. SF has been a econ/trade hub for the last hundred years.04/17/2014 - 2:45pm
Andrew EisenMixedPixelante - Would you like to expand on that?04/17/2014 - 2:43pm
MaskedPixelanteWell, I am officially done with Night Dive Studios. Unless they can bring something worthwhile back, I'm never buying another game from them.04/17/2014 - 2:29pm
PHX Corphttp://www.msnbc.com/ronan-farrow/watch/video-games-continue-to-break-the-mold-229561923638 Ronan Farrow Daily on Video games breaking the mold04/17/2014 - 2:13pm
NeenekoAh yes, because by building something nice they were just asking for people to come push them out. Consequences are protested all the time when other people are implementing them.04/17/2014 - 2:06pm
Matthew Wilsonok than they should not protest when the consequences of that choice occur.04/17/2014 - 1:06pm
NeenekoIf people want tall buildings, plenty of other cities with them. Part of freedom and markets is communities deciding what they do and do not want built in their collective space.04/17/2014 - 12:55pm
 

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