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Midway reveals $240M debt, payment deadline

SEC filing says Mortal Kombat publisher has 50 days to pay off $150 million in debt; default could trigger subsequent $90 million repayment; company's assets total only $167.5 million.

After months of dreary earnings reports, Midway Games got a brief reprieve in November with the release of the decently reviewed Mortal Kombat vs. DC Universe. However, the honeymoon didn't last. This morning, the publically traded publisher issued a filing with the Securities and Exchange Commission that revealed it is carrying a whopping $240 million in debt. That's $72.5 million more than the $167.5 million in total assets--including property--that the company had as of September 30.

Midway's debt breaks down as follows: $150 million is from various note holders (with Wells Fargo as trustee), and another $90 million is from the publisher's former majority shareholder, National Amusements. National Amusements is headed by Sumner Redstone, the multimedia mogul who controls MTV parent Viacom and GameSpot parent CBS. Last week, gloomy stock-market conditions forced Redstone to sell his $30 million stake in the company for $100,000--and the assumption of $70 million of debt--to a private financier buyer, Mark Thomas.

As a result of the ownership change, Midway's debtors are able to call in the company's debts if they so choose. "Based on current market conditions, the registrant [Midway] expects that all holders of the [debt] notes will elect to require the registrant to repurchase their notes," it read. Indeed, Midway has apparently already received notices from investors eager to get their money back.

According to the terms of the $150 million loan, Midway has 20 days to send its debt holders notices of the controlling interest change. Said debt holders then have the option to demand the Chicago-based company repay their loans at 100 percent value--"plus accrued and unpaid interest"-- within 30 days. In short, that means that in mid-January 2009, Midway could default on debt worth nearly twice the $75.9 million quarterly loss that it reported in November. In the company's own words, "If this were to occur, the Registrant [Midway] does not believe, on the basis of its current liquidity, that it would have the ability to satisfy its obligation with respect to the repurchase of the [debt] Notes."

Even worse, defaulting on the $150 million debt would trigger a provision that would let National Amusements call in the $90 million that it loaned Midway. Again, in the filing's own words, "If these amounts were declared immediately due and payable, the Registrant [Midway] does not believe, on the basis of its current liquidity, that it would have the ability to satisfy its obligations to repay these amounts [to National Amusements]."

So what happens then? "I can't really comment other than to say we're pushing forward," a senior Midway corporate communications rep told GameSpot. The rep did confirm that for several weeks prior to today's announcement, Midway has been working with investment bank Lazard to come up with "liquidity solutions" that will be announced "as soon as possible." In the meantime, Midway is sticking to its 2009 release schedule, which has the long-delayed Vin Diesel-starring game the Wheelman launching in mid-February. It also revealed that a sequel to its TNA Impact wrestling game is slated for release later in the year.

238 Comments

  • RaikirBLaZE

    Posted Jan 5, 2009 1:57 pm GMT

    Response to _HellrazerHD_:
    You are the smartest man to comment yet.

  • the_Hippest_Cat

    Posted Dec 9, 2008 1:38 pm GMT

    Midway has a certain sentimental value to anyone who's ever been at the arcade, but it is true that they are far from being an impressive developer as of late. For nostalgic reasons I'd hat eto see them go, but business is business and bad business is worse.

  • Sablicious

    Posted Dec 9, 2008 1:40 am GMT

    Hardly surprising given the best the company can muster is the crap-tastically gimmicky likes of MK Vs DC.
    I'm more surprised that the company is still around at all! -_-

  • DJ-MOTION

    Posted Dec 9, 2008 12:31 am GMT

    This sucks im a Midway fan enjoy all MK games and its not a cheap rip off of street fighter the two are nothing alike plus they made rampage and many other brainless arcade classics sad day in gaming history if you ask me.Imagine a MK game not made by Midway UGH would'nt be right

  • Karmazyn

    Posted Dec 8, 2008 10:48 pm GMT

    Midway games sucks anyway...I can not remeber good Midway game. In last few years they have not done anything good. Sorry Midway but to stay in this business you must entertain possible buyers with your products,you failed to do so...

  • sniperfox89

    Posted Dec 8, 2008 5:00 pm GMT

    never made any real quality games anyways. MK was just a bad SF rip off...

  • Kage1

    Posted Dec 8, 2008 3:36 pm GMT

    Good. Now maybe they will stop making MK games.

  • tu2pac

    Posted Dec 8, 2008 3:31 pm GMT

    That's what they get for never moving away from Mortal Kombat ... I mean did anyone actually enjoy Sub Zero's game? I can't even remember what it was called. It's a simple, the rule applies to everything, evolve or die. It's that simple.

    Games like Ant Bully and The Suffering don't count. And please don't bring up Unreal Tournament ... can you say that game ever truly evolved into anything?

  • lowkey254

    Posted Dec 8, 2008 2:50 pm GMT

    man... all of the companies that were out when I was a kid are going out of business
    @ Chimpman_Z
    Violence is still cutting edge for example Gears of War (2) or God of War (2). They've made some bad decisions is all.

  • sadass

    Posted Dec 8, 2008 2:35 pm GMT

    Damn...Harsh...Well, it was good while it lasted :'(.

    BUT perhaps we must move on.

    [I sound like an old aging wiseman] lol .

  • Rakuho

    Posted Dec 8, 2008 2:15 pm GMT

    chapter 11

  • Downloadpilot

    Posted Dec 8, 2008 1:51 pm GMT

    This is sad. I hope Middway can make it out of this.

  • rikhan_z

    Posted Dec 8, 2008 12:02 pm GMT

    They rocked during the arcades, what happened now?

  • the_sorrow_MGS_

    Posted Dec 8, 2008 11:51 am GMT

    Oh dear, the hitmen are on their way.

  • Chimpman_Z

    Posted Dec 8, 2008 10:52 am GMT

    Here's a bit of advice for Midway. When you go before Congress for your share of the bailout money, don't go in your private jet.

    In all seriousness, why are they still making Mortal Kombat games? It's not Madden! You don't get a new one every year. Violence isn't cutting edge anymore. Give it up.

    I would have much rather had a new Rush game. Bring Rush back. Ah who am I kidding? Midway's done and rightfully so. Goodbye!

  • Homerj

    Posted Dec 8, 2008 10:38 am GMT

    "I'm pretty sure DC wouldn't let them make it M rated."

    Which proves that Midway isnt using good business sense. An analogous situation happened in racers recently. GT5 turned out to be a "bumper cars" simulator, because licenses for certain cars wouldnt allow for damage modeling. For GRID, instead of watering down the gameplay experience, Codemasters simply left out any license that wouldnt let them do what they wanted. If Midway couldnt get away with M rated content while using the DC license, they quite simply should have ditched the license. Instead they chose to doom their company...one bad decision to cap off all the rest.

  • lewis2112

    Posted Dec 8, 2008 10:36 am GMT

    Lets hope EA dont buy Midway, no doubt they will tho, for the rights to MK. and ofc the publishing rights to UT. God damn EA

  • shazam_lp

    Posted Dec 8, 2008 10:25 am GMT

    It will be really sad to see Midway fade out. My 2nd all time favorite game since I was a kid was made by Midway, and that was MK.

  • Bluefish21

    Posted Dec 8, 2008 9:06 am GMT

    I hope this gets sorted out. My best friend works there (he did some of the environments on MKvsDC) and they'd been hearing good news over the past few months so this definitely sucks.

    EA in Chicago closed a few years ago so the only large dev companies left in the area would be High Voltage and Day 1 Studios and if they have any dealings with Midway then they may be on the outs too. High Voltage's last few games have not done well and I don't know what Day 1 has put out lately. The gaming industry in Chicago is about to get really crappy.

  • -Wheels-

    Posted Dec 8, 2008 8:30 am GMT

    Wow, the third oldest game company still running is about to go under. That is sad.

    Thank you for the NBA's Jams and Spy Hunters of our times. May god have mercy on your soul.

  • thirteen_zombie

    Posted Dec 8, 2008 8:09 am GMT

    anyone else want to start a fight club so we can hit reset on the countries debt? I wouldnt mind getting rid of my own debt.

  • Sato2099

    Posted Dec 8, 2008 7:57 am GMT

    I know they don't make games they used to, but never the less Midway has some place in gaming history and it would be bad to see Midway go down.

    I'm MK fan from back in the day(don't like much MK vs. DC), but still this is MK and i will always support it.

    MK = Midway and nobode else.

  • Ilikemyname420

    Posted Dec 8, 2008 7:00 am GMT

    Shari Redstone runs the company into the ground and leaves right before the stock dives??? soooo.....when's the insider trading investigation????

  • ASG_

    Posted Dec 8, 2008 6:08 am GMT

    "ASG...I think Wall Street and the auto makers need to be saved."
    So the people who got us into this mess should get the money?
    I think they can burn in hell, I have to pay even more for games now.

  • vivendidoom

    Posted Dec 8, 2008 4:32 am GMT

    To Dark_surge...

    You do know those games midway was publisher to, only mk is the developer not the publisher...and ed boon's choice placement for the series is just bad decision making.

  • LA_CA

    Posted Dec 8, 2008 2:03 am GMT

    gg midway...

  • BloodMist

    Posted Dec 7, 2008 10:26 pm GMT

    Oh Midway....Midway...*crawls into a corner and cries*

  • dark_surge

    Posted Dec 7, 2008 9:46 pm GMT

    It's a shame to see a company leave that's been around longer than the majority of the posters here. Everybody seems to be focusing on MK vs. DC, whereas the older generation will remember them for classics like Galaga, Spy Hunter, and Rampage. Then Mortal Kombat came along and gave audiences a more "mature" fighting game, followed by Killer Instinct, which is one of my favorite fighters to this day.

  • Gen007

    Posted Dec 7, 2008 9:39 pm GMT

    man its messed up but im not surprised they keep making crap i havent enjoyed a midway game since the 90s and their lastest game the new mortal kombat well is quite frankly garbage i dont see this ending good for them

  • Sw0rDMaN

    Posted Dec 7, 2008 8:57 pm GMT

    I never really been a Midway Fan.. But this is just sad for them =/

  • NerdEmperor

    Posted Dec 7, 2008 8:37 pm GMT

    Bad news for Chicago
    What other Chicago devs are left beside Wideload if Widway goes under?

  • jinzo9988

    Posted Dec 7, 2008 8:34 pm GMT

    I don't know what it is about Midway for me. I've seen lots of potential from some of their games. It feels like every time I play a Midway title, there's usually either a lack of depth or a lack of content, or both. They put too much of the 'arcade factor' into their console games.

    I'll give them credit for the slew of content they put in for their later Mortal Kombat games, but in the end it's still a Mortal Kombat game.

  • mad7334

    Posted Dec 7, 2008 8:26 pm GMT

    I hope Capcom pics up the licence! MK vs Street Fighter FTW!!! Although to be serious EA will probably be the one to get it.

  • medicalmj

    Posted Dec 7, 2008 8:06 pm GMT

    hopefully someone is able to obtain some of midways licenses. They have some great classics that could be remade for next gen gaming.

  • akhauskinz

    Posted Dec 7, 2008 8:02 pm GMT

    I can't believe this could actually happen. Did Midway really think Redstone would hold that stock until the value went up?

  • 0utc4st

    Posted Dec 7, 2008 7:59 pm GMT

    Fatality!!!!!

  • OmegaCookie7

    Posted Dec 7, 2008 6:41 pm GMT

    Tekken and Mortal Kombat would be a sweet cross-over.

  • LastPRmarine

    Posted Dec 7, 2008 4:54 pm GMT

    Genius the crooked CEO of the US automakers are taking the money and running they won't make better they will make the crap they have been selling

  • ctburesch posted Dec 7, 2008 4:43 pm GMT (does not meet display criteria. sign in to show)

    ctburesch

    Posted Dec 7, 2008 4:43 pm GMT (hide)

    You will never read that about EA for the simple fact that make good games. What has Midway made? You actually have to sell a product to turn a profit. The product that Midway has sold has lost themselves money...

  • ctburesch posted Dec 7, 2008 4:41 pm GMT (does not meet display criteria. sign in to show)

    ctburesch

    Posted Dec 7, 2008 4:41 pm GMT (hide)

    ASG...I think Wall Street and the auto makers need to be saved. Midway needs to sink. They do not contribute enough to a global economy to worry about. You just sound like a sour person who is just a victim of the recession

  • Dogswithguns

    Posted Dec 7, 2008 4:15 pm GMT

    Oh, no. not Midway, one of my faves.

  • themyth01

    Posted Dec 7, 2008 2:58 pm GMT

    It's a shame to see game developers going under, I guess acquisitions and mergers are necessary even in this industry to stay alive.

  • Tallgeese3Z

    Posted Dec 7, 2008 2:51 pm GMT

    I have loved playing Midway games in the past, but if the company can't stay solvent, well every living thing must pass, and in an odd sense, companies behave like living things. I hate to say it, but if the company isn't selling enough products to pay its bills, then it needs to change what it makes or how it makes it. If they choose not to do that, or take the company in the wrong direction, then the company dissappears off the face of the planet. Just because Midway is large doesn't mean that they are invulnerable to the market (I have said this about the banking industry and the auto industry as well). It'll hurt, some people will lose jobs, but the industry, our economy, and society as a whole will be better in the long run. Forcing a company to stay in business with no consequences for their inability to function is not right and it prolongs the inherent problem.

    Sometimes you need to prune the dead limbs so that new branches can grow...

  • Inconnux

    Posted Dec 7, 2008 2:43 pm GMT

    I can't wait for the day that the headline is 'EA has millions in debt being called in'... Sorry to hear that midway is going under RIP midway.

  • _HellrazerHD_

    Posted Dec 7, 2008 1:26 pm GMT

    Why are you people bashing midway? They gave us rampage.mortal kombat,pit fighter,smash tv,gauntlet,primal rage,etc. They pushed the limits of the game industry and made history with mortal kombat. MK is what put violent games on the map and if it werent for them, I dont think video games would have made it the way they did today. But then again thats the thing about people and video games now and days,they think they know everything,they think one day they can become a video game master and be payed to play games all the time,well guess what,dreams are sometimes too good to beome true.

    "Oh MK sucks now" really? MK vs DCU is doing pretty damn good right now oe havnt you played it yet. You see,midway did go through too much trial and error which explains thier financial hell right now,but to bash the company and say they were good for nothing clearly points out the ignorance in todays society of so-called opinions and facts.

    Sure midway mght not make it,but kick them while thier down after theyve so much for the game industry is just donw right pathetic.

  • brylawler

    Posted Dec 7, 2008 12:59 pm GMT

    poor midway. they must be down in the dumps.

    i can actually see MKDC doing pretty well. plus it's rated T so younger kids will be able to get it.

    then again, we live in a world where people think GTA is a kid's toy and buy it for their 6-year-old... sigh...

  • unknown2007

    Posted Dec 7, 2008 12:53 pm GMT

    well it's been fun.lol. i will say this though. the last games i played and actually enjoyed that midway created was the Blitz franchise.

  • Guljigit92 posted Dec 7, 2008 12:34 pm GMT (does not meet display criteria. sign in to show)

    Guljigit92

    Posted Dec 7, 2008 12:34 pm GMT (hide)

    So what about Gear of War and Mortal Kombat series are they going to be canned?

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