Seeking to avoid mortal combat with its creditors, Midway Games Inc. filed for Chapter 11 bankruptcy protection Thursday.
This probably isn't game over for the Chicago game publisher. Midway would have tipped over years ago if not for Sumner Redstone, whose family owns National Amusements Inc., a holding company that has controlling stakes in Viacom Inc. and CBS Corp.
Redstone, who has his own financial troubles, pumped hundreds of millions of dollars into Midway before he was forced to sell it last year, for pennies on the dollar, to an investor named Mark Thomas.
The sale triggered a provision in Midway's $150-million debt that allowed creditors to call in their loans Thursday. Unable to fork over the cash, Midway filed for Chapter 11. The firm owes an additional $70 million to Thomas and $20 million to National Amusements, for a total of $240 million in outstanding debt.
"The credit markets have dried up so rapidly, we weren't able to put together financing fast enough to alleviate the financial situation," said Geoff Mogilner, Midway's head of investor relations.
Through his attorney, Thomas declined to comment.
Midway's shares sank 9 cents, or 36%, to 16 cents.
The bankruptcy filing follows the successful release of its game Mortal Kombat vs. DC Universe, which sold about 2 million copies. That ranks it among the best-selling in the Mortal Kombat series.
Analysts say it's unlikely that Midway will disappear. Instead, the bankruptcy filing gives it some breathing room from its creditors, said Michael Pachter, an analyst with Wedbush Morgan Securities.
Midway, which employs 550 people across four development studios in San Diego, Chicago, Seattle and Britain, is worth more if it is allowed to stay in business, Pachter said.
"We've learned from past bankruptcies of companies like 3DO and Acclaim that creditors get almost nothing when they liquidate a game company," he said.