Midway Files for Bankruptcy Protection

Midway Games [MWY] has filed for chapter 11 bankruptcy protection in a  Delaware court after concluding it is unable to repay its debt.

The company was required to repay $150 million in repurchase obligations by today and February 19 following its sale for $100,000 in November by Sumner Redstone. Filing for chapter 11 will enable Midway to reorganize while it tries to sustain its business.

Midway is seeking approval from the court for a variety of first day motions enabling the company to continue managing its operations in the ordinary course. These motions are typical of the restructuring process, and approval is regularly granted, the company said.

“This was a difficult but necessary decision,” said Midway Chairman, President and CEO Matt Booty. “We have been focused on realigning our operations and improving our execution, and this filing will relieve the immediate pressure from our creditors and provide us time for an orderly exploration of our strategic alternatives. This Chapter 11 filing is the next logical step in an ongoing process to address our capital structure.”

“Midway enters this process with strong underlying fundamentals, as evidenced by solid fourth quarter sales that exceeded expectations in spite of a challenging retail and general economic environment,” Booty added. “Overall, Mortal Kombat vs. DC Universe sales are approaching 2 million units shipped, TNA Impact has shipped approximately 1 million units, and our Game Party franchise has sold close to three million units in total.”

Shares of Midway were down 36 percent, or 9 cents in morning trading.