This past Sunday, Atari Inc. (the U.S. Branch of Atari) filed for Chapter 11 bankruptcy in an effort to break free from their French parent Atari S.A. The following day, however, Atari S.A. itself filed for the French equivalent (Book 6 of the French commercial code), after being informed by main shareholder and sole lender BlueBay that they were no longer “in a position to continue to support the Company”. Atari Inc. is actively seeking a buyer so that the company can continue operations and go private, while Atari S.A. have not announced anything about prospective future plans. Their separation from Atari Inc. does leave them with few marketable assets, so it is most likely that the company will be broken off and sold before discontinuing the brand.
Atari has released a statement, confirming that since BlueBay announced their intended sale of their 29% stake in the company back in October of 2010, “no investor has been willing to replace them as reference shareholder and principal creditor”. BlueBay is set to be repaid on its outstanding credit line as part of the impending sale, which is due March 31st 2012 and valued at $28 million.
The CEO of Atari, Jim Wilson, described the situation in the aforementioned statement, “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.”
If the Chapter 11 bankruptcy is successfully completed for Atari Inc., they could be reborn with little or possibly no debt to BlueBay, but for now they have secured $5.25 million in debtor-in-possession financing from the Tenor Capital Management firm to continue operations and release games. Despite Atari releasing a modernized version of Pong and a compilation of its classic arcade titles, they have experienced major financial losses over the past few years. In the 2012 fiscal year, the company’s revenue fell by 34%, while in the 2011 fiscal year it fell 43%. Profits for the same period were at $11 million and $4 million, respectively.
Atari still had a busy 2012, including announcing a competition for indie developers to create a game inspired by Pong to celebrate the its 40th anniversary. Towards the later part of the year, Atari also announced a mobile line-up including RollerCoaster Tycoon, Dungeons and Dragons, Centipede: Origins and Outlaw.
In its 31 years of history, Atari has undergone many changes. In 1984 the original Atari Inc was split, with its arcade division becoming Atari Games Inc., which held the logo and brand name rights. In the 1990s Atari merged with JT Storage before being bought by Hasbro Interactive in 1998. Infogrames Interactive then bought Hasbro Interactive in 2001, changing the subsidiary’s name to Atari Interactive in 2003. The U.S. company GT Interactive was renamed to Atari Inc. in 2003, Infogrames having attained a majority stake in the company in 1999, and finally completing the acquisition in 2008.
Report filed by Thomas Coutts