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Midway Creditors Settle With Investor Mark Thomas

Midway Creditors Settle With Investor Mark Thomas

June 8, 2009 | By Kris Graft

June 8, 2009 | By Kris Graft
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More: Console/PC

Creditors for bankrupt Chicago-based Mortal Kombat house Midway Games have entered into a settlement agreement with Mark Thomas, a little-known investor who bought the publisher from media mogul Sumner Redstone last year.

According to a June 4 court filing originally mentioned by Bloomberg, and independently found by Gamasutra, Midway's Official Committee of Unsecured Creditors agreed to give Thomas and his associated parties a first priority secured claim against Midway in the amount of $5 million. Thomas will be able to collect that amount, less any amount paid by Midway to Thomas since the publisher filed for bankruptcy in February, before other creditors.

Midway's creditors committee said it estimates it paid Thomas around $287,000 to date, an amount that will go towards the settlement value. In exchange, Thomas agreed to relinquish all claims against Midway.

Thomas had been seeking to collect a total of $70 million, considerably more than the settlement amount.

The settlement comes after Midway creditors filed suit last month against Thomas, former majority stakeholder Redstone, and members of Midway's board.

Midway's creditors said that successful litigation against Thomas could have reaped larger rewards, but Midway creditors said Thomas and his attorneys would most likely have defended their position "vigorously," resulting in "extensive, time-consuming and costly discovery, research and litigation."

The court filing also said the settlement agreement "more than adequately satisfies the standard for approval." Midway's committee said the agreement is a "prudent exercise of its business judgment."

Thomas purchased Midway from media mogul Redstone last year for $100,000, and the assumption of $70 million in debt.

But while creditors came to an agreement with Thomas, they aren't letting other parties off the hook. Still pending in court is a suit that accuses Redstone, his daughter Shari Redstone, and Midway board members of a number of wrongdoings, including breach of fiduciary duty, corporate waste and unjust enrichment.

In May, Warner Bros. made a $33 million bid for the bankrupt Midway Games in a "stalking horse" asset purchase agreement that would include Mortal Kombat and Midway's Chicago and Seattle studios.

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