Only 50 days to live for Midway Games (MWY)?
Earlier this week, Sumner Redstone sold his 87% stake in the game publisher to private investor Mark Thomas for a paltry sum of about $100,000. But there’s a kicker: The sale triggered a provision allowing Midway’s creditors to demand immediate repayment of debt, about $150 million. Midway says it expects all its bondholders to demand payment, and it also says it won’t be able to meet the request.
It seems inconceivable that the man who bought Redstone’s stake, Mark Thomas, didn’t know about these bond convenants (but anything is possible). At this point, Sumner’s company, National Amusements, still appears to be on the hook for the debt–which won’t make Sumner’s angry creditors happy:
Chicago Tribune: Midway’s default on the $150 million also would allow National Amusements, Redstone’s holding company, to ask for the immediate repayment of a $90 million revolving credit line that it extended in February. Midway said it also would be unable to make that payment.
These events could take time to unfold, since Midway has 20 days to notify its bondholders. Those creditors then have 30 days to respond.
The $70 million in debt that Thomas assumed in the sale was part of this $90 million loan agreement. Mogilner said National Amusements still is administering the credit on Thomas’ behalf.
Despite having what appears to be a hit in “Mortal Kombat Vs DC Universe” on the market and well-positioned for the holiday season, there’s no way Midway is going to get the cash in time.
Midway has just over $10 million cash on hand. The company has hired investment firm Lazard to help manage its debt, but if creditors won’t play ball Midway could be bankrupt by the end of January.