Midway has 50 days to come up with $150 million.
The struggling videogame publisher disclosed in a Securities and Exchange Commission filing Thursday that Sumner Redstone’s recent sale of his controlling stake to investor Mark Thomas triggered a provision allowing holders of its debt notes to request payment of the principal. Given the company’s dire financial state, they’re expected to do so.
Midway, which had just $10.3 million on hand as of Oct. 31, won’t be able to pay back the debt and has engaged financial advisory firm Lazard to help it explore strategic and financial alternatives to stay in business. If Midway can’t find a new source of funding or renegotiate its debt, it would likely have to declare bankruptcy.
Thomas has informed Midway management that he will remain a completely passive investor despite his 87% stake. He isn’t taking a seat on the board and is not getting involved in the current liquidity issues.
Midway has consistently lost money since Redstone took control in 2004, costing the CBS/Viacom mogul more than $500 million in equity. He sold his stake to Thomas for just $100,000 in order to enjoy a tax benefit that could help with the debt problems of his holding company, National Amusements.
Despite its problems, Midway’s recent release “Mortal Kombat vs. DC Universe” has been well received and is expected to provide a much-needed boost to the company in the current quarter.