Midway files for bankruptcy protection

Sumner Redstone sold majority stake in November

Video gamer Midway said Thursday that it filed for Chapter 11 bankruptcy protection, the result of Sumner Redstone having sold his majority stake in the company three months ago at a substantial loss.

That change in ownership, the company said, "triggered accelerated repurchase obligations relating to two classes of Midway debt, which Midway anticipated it would be unable to satisfy.

Midway said the bankruptcy does not include its non-U.S. operations. It also said it expects to run its U.S. business as usual despite the bankruptcy filing.

Midway shares dropped 40% on the news in afternoon trading to about 16 cents. Three years ago, when Redstone was slowly purchasing more than 80% of the company, shares were at north of $10 each.

Midway's economic troubles come despite several hit products, including its "Mortal Kombat" franchise, "TNA iMPACT!" and the "Game Party" franchise.

"This Chapter 11 filing is the next logical step in an ongoing process to address our capital structure," Midway CEO Matt Booty said.

In November, Redstone, executive chairman of both Viacom and CBS, sold his 87% stake in Midway to investor Mark Thomas. Some speculate that the bankruptcy is his first step toward taking the company private.

Midway said in court documents it has $167.5 million in assets and $281 million in liabilities.