LITTLE ROCK — The U.S. operations of video game maker Atari have filed for bankruptcy in an effort to break free from their debt-laden French parent.
Atari Inc. and three of its affiliates filed petitions for Chapter 11 reorganization in U.S. Bankruptcy Court in New York late Sunday.
Its leaders hope to break the American business free from French parent Atari S.A. and in the next few months find a buyer to take the company private. They hope to grow a modest business focused on digital and mobile platforms, according to a knowledgeable person not authorized to discuss the matter.
Although the 31-year-old brand is still known worldwide for its pioneering role with video games such as Pong and Asteroids, Atari has been mired in financial problems for decades. Since the early 2000s, it has been closely tied to French company Infogrames, which changed its name to Atari S.A. in 2003 and in 2008 acquired all the gaming pioneer’s American assets.
Atari S.A. Chief Executive Officer Jim Wilson - who has been with Atari Inc. since 2008 - has attempted to rebuild the company.
Atari has 40 employees in the U.S. and has been developing games for smart phones and the Web based on well known properties - among them a successful “greatest hits” compilation of arcade titles and an updated version of Pong. Wilson has also licensed the Atari logo for consumer products, a business that provides about 17 percent of the company’s revenue.
There is evidence that the U.S. operation, which after the sale of other assets now makes up the bulk of Atari S.A.’s business, has been improving.
The corporate parent has been profitable for the past two fiscal years, save for the effect of a money-losing French subsidiary, Eden Games, that has been up for sale. Before that, neither Atari S.A. nor Infogrames had been profitable for about a decade.
Still, its prof its have been small ($11 million and $4 million, respectively, for the past two fiscal years) and revenue plummeted 34 percent in fiscal 2012 and 43 percent in fiscal 2011.
But the company’s growth potential has been hampered by its near total reliance on London financial company BlueBay Asset Management for cash. A $28 million credit facility with BlueBay lapsed Dec. 31, leaving Atari without the resources to release games currently in the works, including a real money gambling title game titled Atari Casino.
Efforts to recapitalize the corporation have been unsuccessful, in part because of its complex structure as essentially an American business with a French public stock listing.
Shares in Atari S.A. have dropped in value from more than $14.64 in 2008 to less than $1.33.
Atari Inc. has secured a commitment for $5.25 million in debtor-in-possession financing to continue operations and release games. If Chapter 11 is successfully completed, the U.S. business could re-emerge with its own resources and little or no debt to BlueBay.
It’s not clear who might buy Atari Inc., although Wilson will probably seek backers to help him keep control. It’s also possible the company could be sold to another buyer, whole or in pieces.
Atari’s remaining French businesses would probably seek legal protection to find a buyer or dissolve in that country.
Representatives for Atari S.A. and BlueBay did not immediately respond to requests for comment.
Business, Pages 3 on 01/22/2013