Atari Inc. Files For Ch. 11 To Separate From Troubled French Parent, And Sell Or Restructure Famous Gaming Assets

Atari â€" the iconic company and that helped spearhead the videogames industry 40 years ago with titles like Pong, Asteroids and Centipede, as well as consoles to evolve the consumer electronics field â€" has filed for Chapter 11 bankruptcy protection to “separate from the structural financial encumbrances” of its French parent, Atari S.A., and to seek “independent capital for future growth” in digital and mobile games. The company may restructure as an independent entity, or it might get sold off in whole or in parts.

The filing was made in the United States Bankruptcy Court for the Southern District of New York and covers Atari Inc., Humongous Inc. and California US Holdings Inc..

As part of that process, it says it is looking to secure $5.25 million in debtor-in-possession financing from one or more funds managed by Tenor Capital Management, a firm specializing in convertible arbitrage and special situations. Atari says expects to continue day-to-day operations throughout this process.

The official statement from Atari doesn’t reveal too much more, but the LA Times has some more details: it notes that the company is currently profitable, but only just: $4 million in fiscal 2012 and $11 million in 2011 â€" coincidentally, the same price that Infogrames (the former name of the French parent before it adopted Atari branding) paid for Atari back in 2008. Revenues have been dropping fast, however: down 34% in 2012 and down 43% in 2011.

On top of this, financing that Atari had in place has dried up: a $28-million credit facility with BlueBay lapsed Dec. 31, the LA Times notes. That meant a delay for the release of “Atari Casino,” Atari’s foray into real-money gambling â€" a route other troubled gaming companies like Zynga are also exploring to boost revenues.

The LA Times notes that one outcome, in addition to a sell-off of the Atari brand and assets, is that the CEO of Atari Inc, Jim Wilson, may try to raise the funds to keep control of the company.

Wilson has been with Atari Inc. since 2008, and has been CEO of the French parent since 2010 â€" although with that business winding down â€" they’re looking for a buyer for key asset Eden Games â€" he will have some more time on his hands to focus on the U.S. operation.

Wilson has been central to Atari’s foray into digital and mobile games. But as we have seen time and time again, early movers, as Atari was in gaming, are not always the best at adapting to changing times (and, crucially, leading in innovation). It was only in 2011, for example, that Atari decided to focus on mobile games. Indeed, these days, one of the company’s most valuable assets is the iconic logo, “familiar to 90% of Americans”, which provides some 17% of Atari’s annual revenue through licensing royalties.

Release below.

Image: Flickr

Atari Files For Chapter 11 To Separate From French Parent

NEW YORK, Jan. 21, 2013 /PRNewswire/ â€" Today Atari Inc., Atari Interactive Inc., Humongous, Inc. and California US Holdings, Inc. (collectively, the “Companies”) filed petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. With this move, the U.S.-based Atari operations seek to separate from the structural financial encumbrances of their French parent holding company, Atari S.A. (formerly Infogrames S.A.) and secure independent capital for future growth, primarily in the areas of digital and mobile games.

Within the next 90-120 days, the Companies expect to effectuate a sale of all, or substantially all, of their assets in a “sale free and clear” under section 363 of the Bankruptcy Code or to confirm plans of reorganization that accomplish substantially the same result. These assets include not only one of the most widely recognized brand logos, which is familiar to 90% of Americans, according to a recent survey, but also legendary game titles including Pong®, Asteroids®, Centipede®, Missile Command®, Battlezone® and Tempest®. Other recognized brands include Test Drive®, Backyard Sports® and Humongous®.

Under current management, Atari Inc. has shifted its business from traditional retail games to digital games and licensing with an increased focus on developing mobile games based on some of Atari’s most iconic and enduring franchises. With these moves, the company has added new revenue models, including digital download and advertising. As a result, Atari Inc. has become a growth engine for Atari S.A., which in turn has reported consecutive annual profits in 2011 and 2012.

The company has recently launched a slew of chart-topping titles for iOS and Android mobile platforms, including Atari® Greatest Hits, Outlaw™, Breakout® and Asteroids Gunner®. The company has previously announced upcoming mobile and tablet games based upon the popular Rollercoaster Tycoon® franchise and Atari® Casino.
The Chapter 11 process constitutes the most strategic option for Atari’s U.S. operations, as they look to preserve their inherent value and unlock revenue potential unrealized while under the control of Atari S.A. During this period, the company expects to conduct its normal business operations.

The U.S. companies are also seeking approval to obtain $5.25 million in debtor-in-possession financing from one or more funds managed by Tenor Capital Management, a firm specializing in convertible arbitrage and special situations. Each unit has filed a number of traditional “first-day” pleadings, which are intended to minimize any disruption of their day-to-day operations.

Peter S. Partee, Sr. and Michael P. Richman of Hunton & Williams LLP are proposed to serve as lead counsel for the U.S. companies in their respective Chapter 11 cases.

About Atari
Atari (www.atari.com) is a multi-platform, global interactive entertainment and licensing company. Atari owns and/or manages a portfolio of more than 200 games and franchises, including world renowned brands like Asteroids®, Centipede®, Missile Command®, Pong®, Test Drive®, Backyard Sports®, and Rollercoaster Tycoon®. Atari capitalizes on these powerful properties by delivering compelling games online (i.e. browser and digital download), on smartphones and tablets and other connected devices. The Company also develops and distributes interactive entertainment for video game consoles from Microsoft, Nintendo and Sony. As a licensor, Atari extends its brand and franchises into other media, merchandising and publishing categories.

Atari is a global producer, publisher and distributor of interactive entertainment software for all market segments and all interactive game platforms including consoles from Microsoft, Nintendo and Sony, advanced smartphones, Personal Computers, web and online. Its games are sold in more than 60 countries through an international distribution network and direct to consumers via http://www.atari.com.

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