Midway's U.S. operations filed for Chapter 11 bankruptcy today, as the Mortal Kombat publisher runs out of time to pay its debts.
The publisher owes $150 million to its bond owners because of a buyback obligation triggered when media mogul Sumner Redstone sold his controlling stake in the company on December 1.
Midway managed to gain a month's time to buy back the senior notes through two separate agreements it reached with its bond owners. The first of these, which accounts for half the notes, expires today, and the other $75 million expires on February 19th.
Today's bankruptcy filing suggests that Midway was unable to either find a source of credit or gain additional time from the bond owners, and the company says it "anticipated it would be unable to satisfy" both classes of debt.
And unless Midway pays back the $150 million in notes by February 19, it will end up owing Redstone's National Amusements Inc. an additional $90 million, compounding its total debt to $240 million.
"This was a difficult but necessary decision," Midway president, CEO and newly-appointed Board chairman Matt Booty said.
"This filing will relieve the immediate pressure from our creditors and provide us time for an orderly exploration of our strategic alternatives," he said.
Filing for Chapter 11 is the "next logical step" in Midway's reorganization process, Booty adds. According to the company, it will be able to keep doing business as usual, and it's seeking court permission to go on managing its own operations.