The filings are likely to result in the separation of the profitable U.S. operations from the loss-making French parent. The U.S. businesses, which include New York-based Atari Inc., Atari Interactive Inc., Humongous Inc. and California U.S. Holdings Inc., will be sold or restructured within 90 to 120 days, according to a statement issued by the French video game maker.
The move comes after Atari's backer, BlueBay Asset Management LLP, of London, informed Atari that two funds invested in the company are in liquidation. BlueBay's funds own 29% of Atari SA, control 64% of its voting rights and are its sole lender, with €21 million ($27 million) of outstanding loans. BlueBay is a unit of Royal Bank of Canada.
"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," Atari CEO Jim Wilson said in a statement. "Through these ongoing procedures, and especially the auction process in the U.S., we will seek to maximize the proceeds in the best interest of the company and all of its shareholders."
BlueBay's loans to Atari fall due on March 31. Atari said that it had no means to repay the loan and had been "starved for funds and unable to finance its continued growth."
The U.S. operations have secured $5 million in debtor-in-possession financing from Tenor Capital Management Co. LP.
The fate of the French operations is less clear. Atari said Atari SA and Atari Europe SAS have filed for bankruptcy protection before the French courts in line with Book 6 of the French Commercial Code. It made no mention of efforts to sell the operations or restructure the business.
Atari was founded in 1972 and was instrumental in popularizing both arcade-based video games and later home gaming through successful titles such as "Pong," "Asteroids" and "Missile Command."
Shares in Atari SA are listed in Paris. They were suspended Tuesday at €0.86 per share, equating to a market capitalization of €25 million.
Dechert LLP hired funds attorney Asma Chandani as counsel in Los Angeles. For other updates launch today's Movers & shakers slideshow.
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