Atari Inc. and three of its affiliates filed petitions for Chapter 11 reorganization in U.S. Bankruptcy Court in New York late Sunday.
Less than 24 hours later, its parent company, Paris-based Atari S.A., took a similar measure and sought protection under France's commercial code.
The U.S. division's leaders hope to break the American business free from its French parent 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 publicly.
Despite seemingly never-ending corporate drama, 31-year-old Atari remains one of the best-known video game brands in the world. Titles including "Pong" and "Asteroids" were among the first arcade titles in the 1970s and Atari built the first broadly popular home video game system, known as the 2600. But it was never able to replicate that success or recover from a gaming industry crash in the 1980s.
Since then, it has changed hands among numerous owners, including Warner Communications (now Time Warner) and Hasbro.
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.
Chief Executive Jim Wilson has been with Atari Inc. since 2008, and in 2010 became CEO of the French parent. The New York-based executive has attempted to rebuild the company, which has just 40 employees in the U.S., by developing games for smartphones and the Web based on well-known properties,Â€Â” among them a successful "greatest hits"Â€Â compilation of arcade titles and an updated version of "Pong."Â€Â He 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 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 profits 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 game titled "Atari Casino."Â€Â
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.
"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," 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."Â€Â
Shares in Atari S.A. have dropped in value from more than 11 euros in 2008 to less than 1 euro recently.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 reemerge with its own resources and little or no debt owed to BlueBay.
According to its bankruptcy filing, Atari Inc. has $1 million to $10 million in assets and $10 million to $50 million in liabilities.
It's not yet clear who might step up to 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.A. did not make any indication about its plans, though with few assets outside of its American subsidiary, it will quite possibly sell off parts of the company and dissolve. In a statement, Atari S.A. said it was filing for legal protection because longtime backer BlueBay has sought to sell its 29 percent stake and demanded repayment by March 31 on the $28 million credit line it cut off in December.
No investor has been willing to replace them as reference shareholder and principal creditor, Atari S.A. said.
A spokeswoman for BlueBay declined to comment.
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