Court OKs Midway operations, NYSE delists stock
US bankruptcy court approves use of cash for continued operations; bondholders file formal objection over mystery buyer's dealings as New York market ceases trading shares of publisher.
Today, a US bankruptcy court in the district of Delaware has given Midway Games permission to use its remaining cash reserves to continue day-to-day operations. The ruling comes several days after the Chicago-based company filed for Chapter 11 bankruptcy protection after defaulting on a deadline to repay more than $240 million in debt.
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"Approval of these motions is an important first step in this planned and orderly reorganization, enabling Midway to continue to operate as usual during this process," said Midway Chairman and CEO Matt Booty. "We remain confident in Midway's ability to use this proven process to address our capital structure and explore our strategic alternatives."
The bankruptcy court's approval comes just days after Midway's stock was delisted from the New York Stock Exchange. Late Friday, the market's regulatory board announced that it had "determined that the common stock of Midway Games Inc. [ticker symbol MWY] should be suspended immediately." The company was served with a delisting notice last November after its share price dropped below $1.
Also on Friday, the Chicago Tribune reported that many holders of Midway's debt filed a formal objection in the same bankruptcy court. The objection claims that the bankruptcy filing, which will let Midway postpone and possibly even cancel some debt repayments, is "tainted by highly unusual transactions by insiders...that, to put it charitably, require significant scrutiny."
The bondholders' objection takes particular exception with last November's "change in ownership," when then-majority stockholder Sumner Redstone sold off his 87 percent stake in the company--valued at $30 million--for $100,000. According to the Tribune, the objection singles out the fact that the buyer, Mark Thomas, might "reap an enormous, almost unprecedented windfall" if Midway is sold for even a small portion of its former worth. Given its catalog of gaming properties, such a sale is more than likely; the company is already widely rumored to have hocked its Wheelman game to Ubisoft.
The bondholders want Thomas to provide more information about his relationship to Redstone and the reasons for the exchange. However, the mysterious financier has taken the complete opposite tack, withholding even the most basic information from Midway shareholders, including his employment history and place of residence.
"It's a very unusual situation," said bondholder attorney Greg Bray. "We're all curious."
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