By Michael Bathon - Nov 1, 2013 12:00 AM ET
Atari Inc., the bankrupt video-game maker, won court approval to seek creditors’ votes on its plan to exit bankruptcy protection as a going concern.
U.S. Bankruptcy Judge James M. Peck approved the company’s disclosure statement, an outline of the restructuring plan, finding that it contained adequate information for creditors to make an informed vote, according to court documents filed Oct. 29 in Manhattan. The company is scheduled to seek court approval of its reorganization plan at a Dec. 5 hearing.
“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 filings. Unsecured creditors are projected to receive a recovery of as much as 25 percent.
The company sought bankruptcy protection in January intending to break away from French parent Atari SA (ATA), which hasn’t made a profit since 1999 and sought related relief from creditors under French law, the company has said.
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 key assets including its namesake brand, for which it was seeking a minimum of $15 million.
Atari, founded in 1972, changed course in September and now plans to reorganize and continue operating with the brands it has left, according to court documents. Its parent is sponsoring the restructuring plan.
Atari and the parent determined the “business and remaining assets have substantial value that would not otherwise be realized in a liquidation.” 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, would 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.
Atari SA is waiving its right to any distribution on its $309.5 million in intercompany claims, according to court documents. Alden Global Capital, which acquired a secured credit facility to Atari SA in February, would be paid in full on the $5 million it loaned to help fund the bankruptcy case.
The case is In re Atari Inc., 13-bk-10176, U.S. Bankruptcy Court, Southern District of New York (Manhattan).