The world’s oldest computing gaming company, Atari, has filed for insolvency. The companies have co-ordinated to request filings for Book 6 procedures in France and Chapter 11 protection in the United States.
The company has been informed by its main shareholder and sole lender, BlueBay, that no solution has been found to date for the sale of its holdings in the company.
It is not in a position to continue to support the Atari, as the two funds invested in the company – The BlueBay Value Recovery (Master) Fund and The BlueBay Multi-Strategy (Master) Fund – which together hold 29% of the shares and voting rights on a non-diluted basis and 64% on a fully diluted basis, are in liquidation.
Since BlueBay has announced its intentions to sell its position in October 2010 and to be repaid on its outstanding credit line, no investor has been willing to replace them as reference shareholder and principal creditor because of the French listing, limited free float, the complicated nature of the company’s capital structure, and the difficult economic and sector operating environment.
Despite Atari recording positive current operating income for FY11 and FY12, and having reduced on and off-balance sheet liabilities by approximately 130-million euros, with only working capital liabilities and 21-million euros owed to BlueBay, Atari has been starved for funds and unable to finance its continued growth.
With the BlueBay credit facility becoming due on 31 March 2013, and the strain on cash resources experienced by the group due to adverse trading conditions and limited development funds, management has resolved that it needed to file for Chapter 11 protection in the United States for the US entities of the Atari group, which has been done with immediate effect.
Atari SA and Atari Europe SAS have also filed for related procedures before the French courts, pursuant to Book 6 of the French Commercial Code. The board has been informed and unanimously supports this line of action.
The US entities expect to effectuate, within the next 90 to 120 days, the sale or restructuring, under Section 363 of the US Bankruptcy Code, of all or most of their assets.
The US companies have had approval to obtain $5-million in debtor-in-possession financing from one or more affiliates of Tenor Capital, a firm specialising in distressed lending and transactions.
During the Chapter 11 proceedings, the companies will conduct business as usual. As part of the legal process, Robert Mattes, group CFO, has stepped down from his functions and will remain CFO of the US entities.
Laurence Betito, financial controller of Atari SA, will take over the role of CFO of Atari SA.
“In light of the current situation with BlueBay, we have decided to take what we think is the best decision to protect the company and its shareholders. Through these ongoing procedures, and especially the auction process in the US, we will seek to maximise the proceeds in the best interest of the company and all of its shareholders,” says Jim Wilson, CEO of Atari.
In order to ensure equality of access to information and prevent any risk of transactions which would not respect this principle, the company has requested the suspension of trading of its shares and other financial instruments on the Euronext Paris market of NYSE Euronext. The company will notify the market of the next steps relating to these procedures.