Sumner Redstone offloaded his majority stake in Midway Games earlier this week to ease his own debt woes, and now the gaming company is facing a grim future — including possible bankruptcy — as a result. Chicago-based Midway, publisher of the Mortal Kombat franchise, warned that it could end up defaulting on $240 million in debt — including $90 million it owes to Redstone’s National Amusements — because of the change in majority ownership and its preexisting financial troubles.
In an SEC filing today, Midway detailed why it’s on the hook for so much cash: Redstone’s sale triggered provisions that allow the company’s stockholders to ask that it repurchase all the bonds (to the tune of $150 million), and its debtors to ask for full repayment. As of October 31, Variety says Midway only had about $10.3 million on the books, so if either shareholders or National Amusements come calling (which, given the economic climate, the company believes will happen) it won’t be able to make good on the payments. Midway has hired Lazard, Inc., a third party investment advisement firm, to help it come up with “strategic and financial alternatives” to defaulting.