News

Shady Dealings in Midway Bankruptcy Case?

| 15 Feb 2009 19:15
image

Ever heard of Mark Thomas? No? Well nor has anybody else, which is proving to be quite the sticking point in Midway's Chapter 11 proceedings.

Thomas bought previous owner Sumner Redstone's controlling interest in Midway for a comparatively paltry $100,000 and with it millions of dollars worth of secured debts. Sounds like a weird deal, right? Ordinarily it would be, but with Midway filing for Chapter 11 bankruptcy, those secured debts get preference over unsecured debts, which basically amounts to all of Midway's other creditors, meaning that the mysterious Mark Thomas stands to make a great return on his investment.

A motion filed with the Delaware bankruptcy court on behalf of some of Midway's other creditors seeks to block this move however, and raises questions about the relationship between Thomas and Redstone, coming close to accusing the pair of insider trading. The following is a short extract from the motion:

"[Midway] was dominated and controlled until November 28, 2008, by Sumner Redstone...As recently as February 29, 2008, [Midway's] balance sheet was far less encumbered by debt... On February 29th, 2008 [Midway took three loans from Redstone-controlled entities]... just like that [Midway's] $15 million in outstanding loan indebtedness... ballooned to $90 million... to [Redstone]

... After the consummation of these Insider Loans... the Redstone parties sold for [$100,000] all of their [holdings] to... a very secretive individual named Mark Thomas... a person virtually unknown in the video game industry... No disclosures ever have been made regarding Thomas or what, if any, relationship Thomas or his companies have with any Redstone Party... But it is safe to assume there must be a connection... given that Redstone essentially gifted [Midway for a mere $100,000]... to Thomas...

[Thomas stands] to reap an enormous, almost unprecedented windfall... if paid in full... the Thomas Parties will recover some 30,000% on their $100,000 investment within a matter of a few months... The Thomas Parties' return stands in stark contrast to the tens, or potentially even hundreds, of millions of dollars... that the Redstone-Thomas transaction may have stolen from [other creditors]..."

Speaking to GamePolitics, analyst Michael Pachter said: "In substance, [Midway's Creditors are] saying that Redstone orchestrated this, and they don't like it. They are trying to keep Thomas from pulling cash out until they get a chance to reorganize, as that could accelerate and exacerbate Midway's troubles."

The full motion can be found here

RELATED CONTENT
Comments on