Midway Lays Off 25 Percent, Closes Austin Studio, Kills Projects

Facing possible bankruptcy, Midway games will close its Austin studio entirely, suspend development on several unspecified titles, and reduce its workforce by 25 percent. The 180 employees laid off will be "across multiple disciplines within the company" in its Chicago and San Diego locations, in addition to the Austin closure. Midway says it expects to pay about $1.6 million in severance for the downsized employees. Midway did not list which projects it plans to cancel or suspend, but calls them "non-core" projects slated for 2010 and 2011 that had not yet been announced. The Austin studio -- already the site of layoffs earlier this year -- housed the company's Central Outsourcing Group and two projects in prototype that are presumed to be canceled with the studio closure. The Mortal Kombat creator has essentially descended into a crisis state in recent months. It is in danger of defaulting on $240 million in debt, faces possible delisting from the New York Stock Exchange, and has hired investment adviser Lazard Ltd. to help manage its alternatives to bankruptcy. Recently, majority shareholder Sumner Redstone sold his 87 percent stake in the company to private investor Mark Thomas for just $100,000 and the assumption of $70 million in debt. With today's announcement, Midway also revealed it will incur an additional $20 million in charges related to bond repurchases requested by its bondholders after the Redstone departure. The company expects all of its bondowners to request a buyout, which will cost the company $150 million that it does not have. If Midway fails to repurchase the bonds, it compounds a $90 million loan agreement with Redstone’s National Amusements company and increases total debt to $240 million. "The cost-reduction measures are vital for us to rationalize our operations and provide the resources necessary for our core properties to succeed," says CEO and president Matt Booty. "These initiatives, along with the other steps we have taken this year, are a response to the specific challenges we are facing at Midway, many of which have been amplified by the current economic conditions."