The game is over — at least for Atari SA (EPA:ATA), as it sought protection under Chapter 11 of the U.S. Bankruptcy Code in order to separate itself from its unprofitable French parent. The company, which has more than 200 videogames under its portfolio, listed debts ranging between $10 and $50 million, which includes the $28 million credit facility the company owes BlueBay. Atari’s assets range between $1 and $10 million. The company said it owes at least 200 creditors, with a possibilty that figure will increase to around 1,000.
Atari and its three subsidiaries — Atari Interactive Inc., Humongous Inc., and California US Holdings Inc. — said it will either sell all or substantially all of its assets, or push a reorganization plan through confirmation that will result in the same in order to realize its value. Atari, founded in 1972 is one of the pioneers of arcade and video games, currently the company is lagging behind Activision Blizzard, Inc. (NASDAQ:ATVI), the world’s largest video game maker by sales, and Electronic Arts Inc. (NASDAQ:EA). In an effort to cut ties with its ailing parent, Atari is seeking approval of a $5.25 million debtor-in-possession financing from funds managed by Tenor Capital Management, a firm specializing in convertible arbitrage and special situations. As customary in bankruptcy, Atari is also seeking to pay employees, both hourly and salaried, and pay its critical vendors.
Carlson Capital's Black Diamond Arbitrage fund is up 5.77% for the first eight months of the year, including a 1.72% return for August. Last year, the fund returned 2.39% for the whole year. Q3 2021 hedge fund letters, conferences and more The fund consists of merger arbitrage mainly consisting of signed or "rate of return" Read More
When the news of the bankruptcy broke, Atari SA (EPA:ATA)’s shares fell as much as 5.6 percent to 84 centimes in Paris before the close of trading on Jan. 21. The French company, according to a Bloomberg News report, has a value of about 25.4 million euros, which decreased by almost one half from last year. The French parent said it has not made any profit since 1999 and has forecasted writing a significant loss for the fiscal year 2012-2013. The French parent is seeking related relief under the laws of France.
Atari’s journey to bankruptcy kind of mirrors Eastman Kodak Company (PINK:EKDKQ)’s bankruptcy. Both are early movers in their own industry, becoming icons, not just in the United States but also around the world, and both have also failed to adapt to the changing times and innovation, eventually leading to their decreasing revenues and financial struggles. Like Kodak, the game may not be officially “over” yet for Atari.
A Los Angeles Times report noted that there are signs that business in U.S. companies are improving and this could be the reason why the units do not want anything to do with their debt-laden parents. The LA Times report pointed out that the corporate parent may be profitable — $4 million in fiscal 2012 and $11 million in 2011, although revenues have been dropping: down 34% in 2012 and down 43% in 2011. Atari SA (EPA:ATA) is also developing “Atari Casino,” a real-money gambling game. Atari has other assets that could be sold off, such as Eden Games. Atari also earns significant revenue, around 17%, from licensing royalties of its iconic logo, the company’s most valuable asset, according to the same LA Times report.