Midway Games Settles with Stockholder for $5 Million

By Evan Mix

Published on June 09, 2009

Bankrupt video game maker Midway Games has reached an agreement with major stockholder Mark Thomas, the first step in its Chapter 11 reorganization. Under the terms of the agreement, Thomas will receive $5 million for his 87-percent stake in the company. Thomas' original secured claim was for $30 million; he had an additional unsecured claim for $40 million.

Thomas bought the stake in Midway from investor and National Amusements CEO Sumner Redstone in November for $100,000, simultaneously assuming the $70 million in Midway debt that was originally owed to National Amusements. The deal was controversial among other Midway creditors, who accused Thomas of fraudulent transfer and other violations. They also sued Redstone for breach of fiduciary duty.

Midway's creditors committee has stated that it believes the company would have won in court against Thomas, but that legal fees and other costs made the $5 million settlement a better financial decision for the company. If the bankruptcy judge handling the case approves the settlement, Midway will be free to negotiate with the smaller stockholders who remain.

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