Sept. 23 (Bloomberg) -- Atari Inc., the bankrupt video-game maker, filed a reorganization plan to give unsecured creditors a recovery of as much as 25 percent and exit court protection as a going concern.
The company sought bankruptcy protection in January intending to break away from French parent Atari SA, which hasn’t made a profit since 1999 and sought related relief from creditors under French law, the company has said.
Atari, founded in 1972, now plans to reorganize with its parent’s support, which is sponsoring the restructuring plan, and continue operating with the brands it has left, according to filings in U.S. Bankruptcy Court in Manhattan.
“The plan effectuates a restructuring transaction under which the sponsor will make contributions to the estates sufficient to ensure a meaningful recovery to holders of general unsecured claims,” the New York-based company said in court papers filed Sept. 20.
A pioneer in the home video-game console market and maker of classic titles such as “Pong” and “Asteroids,” Atari attempted to sell virtually all its assets earlier this year, according to court documents. Atari, which owned or managed more than 200 games and franchises, failed to get qualified offers for its most popular assets, including its namesake brand for which it was seeking a minimum of $15 million.
The company said in court papers that after evaluating its prospects as “ongoing business enterprises” and creditors’ recoveries in various liquidation scenarios, Atari and its parent determined the “business and remaining assets have substantial value that would not otherwise be realized in a liquidation.” Stakeholders would be better served by continuing operations as a going concern, it said.
The video-game maker would reorganize around titles such as “RollerCoaster Tycoon,” “Test Drive” and “Centipede.”
The company moved forward with auctions of seven less valuable franchises that generated a total of about $5.1 million, according to court papers.
Under the reorganization plan, unsecured creditors, which Atari estimates are owed $5 million to $7 million, will get cash payments for a recovery of as much as 25 percent, according to court documents. The recovery estimate assumes the unsecured creditors aren’t owed more than $7 million and would be reduced if allowed claims exceed that amount.
The official committee representing unsecured creditors supports the plan, according to court papers. The unsecured creditors would get a payment of 8 percent of their claims or $560,000, whichever is less, when the plan takes effect. They would get identical treatment one year later, and then get a payment for the lesser of 9 percent of their claims or $630,000 two years later.
Parent Atari SA is waiving its right to any distribution on its $309.5 million intercompany claims, according to court documents. Alden Global Capital, which acquired a secured credit facility to Atari SA in February, will be paid in full on the $5 million it lent to help fund Atari’s bankruptcy. Alden is waiving its right to distributions on account of a secured claim it has against Atari.
The case is In re Atari Inc., 13-bk-10176, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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