Midway’s Saga Continues: Creditors Sue Board, Redstone Over Fire Sale

imageAdd another foreboding twist to the Midway Games bankruptcy saga. The Mortal Kombat publisher owes creditors well over $150 million, and now, those creditors have filed a lawsuit against former majority stakeholder Sumner Redstone, new majority owner Mark Thomas and various members of Midway’s board.

Midway’s creditors include the NBA, Warner Bros. Interactive Entertainment, and Epic Games, among others; they’re arguing that Redstone’s sale of his stake to Thomas came as a “detriment to Midway” — partly because Thomas has no game industry experience — but also because the price allowed Redstone to add an additional $70 million worth of debt to the game publisher’s books.

How Midway, its creditors, and Redstone got to this point, after the jump.

According to Gamasutra, the suit also claims that Midway’s board members took no steps to “investigate” or “unwind” the deal; it also hints at conflicts of interest, as five of the six board members named also held board seats at Redstone’s properties like MovieTickets.com (or National Amusements itself). The creditors are asking the court to deem the fire sale a fraud, and to get the $90 million worth of debt Midway owes to Redstone’s National Amusements recharacterized as equity.

— Dec 1: Redstone sells off his 87 percent stake in the million-dollar company for $100,000
— Dec 5: Midway informs investors, SEC that it’s running out of cash — and might need to file bankruptcy
— Dec 17: Cash crunch forces Midway to lay off 25 percent of staff and shut studios
— Jan 06: Midway gets an extension to pay off debt, but on Feb 22, ultimately files for Chapter 11
— March 03: Midway starts selling its franchises to generate cash
— April 1: Creditors take Midway to task for its plans to pay out nearly $4 million in bonuses

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