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Midway may default on debts

By James Lee

Fri 05 Dec 2008 11:16am GMT / 6:16am EST / 3:16am PST

Repayments amounting to $240 million loom as consequence of majority stakeholder sale

Midway Games has admitted it could default on its debts, as Sumner Redstone's move to sell majority stake triggers potential repayments amounting to USD 240 million.

Earlier this week, Sumner Redstone sold his 87 percent stake in the company to private investor Mark Thomas for USD 100,000 plus USD 70 million in debt.

According to the Chicago Tribune, Midway says that the change in ownership triggers provisions in two series of Midway bonds that allow bondholders to ask for full repayment.

Midway expects all of its bondholders to request this option, which would require the company to pay out USD 150 million, an amount it said it would not be able to meet.

Furthermore, Midway's default on the USD 150 million would allow National Amusements, Redstone's holding company, to ask for the immediate repayment of a USD 90 million credit line that it extended earlier this year.

The process could take up to 50 days to unfold, as Midway have 20 days to inform bondholders and then the creditors have a further 30 days in which to respond.

Midway spokesman, Geoffrey Mogilner, said the company plans to stay solvent and keep to its schedule of game releases. "At this point, our plans stretch out well into next year and beyond," explained Mogilner.

Last month, Midway was informed by the New York Stock Exchange that the company faces delisting if its share price doesn't improve - following the sale of the company to Thomas the price plummeted 40 per cent.

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