The Work

February 13, 2009 2:40 PM

The Bankruptcy Files: Blank Rome to Counsel Midway Games, Charter To File Soon

Posted by Brian Baxter

In The Am Law Daily's adolescent years, we idled away many an hour enjoying the calculated acts of gratuitous violence in the video game Mortal Kombat.

While Mortal Kombat would later be turned into arguably one of the worst movies of all time--Bridgette Wilson's career was an unfortunate fatality--the game itself did boast one of the all-time great soundtracks. (Warning: Unless you want the theme song seared into your brain for the rest of the day, don't click on this link. Can't resist, can you?)

Those days are over--we've moved on to Grand Theft Auto. And we're hardly alone. A dwindling customer base has been a big problem for Mortal Kombat's creator, Chicago-based Midway Games, in recent years.

According to The New York Times's Dealbook, Midway has lost money each fiscal year since 2000. Things got so bad at the company that media mogul Sumner Redstone sold his 87 percent stake in Midway last November to New York businessman Mark Thomas for a paltry $100,000.

On Thursday, the company's money woes finally buried it as Midway filed for Chapter 11 protection in U.S. bankruptcy court in Delaware. Now it looks like Thomas is the one who might profit.

In his deal with Redstone, Thomas also picked up $70 million in Midway debt. With $30 million of that sum secured--it's Midway's lone secured claim--the Chicago Tribune reports that Thomas is now first in line to get paid. Bankruptcy records show that at $40 million, Thomas also holds the third-largest unsecured claim.

Thomas is being represented by Kramer Levin Naftalis & Frankel.

Midway itself is in serious financial straights. The company lists assets of $167.5 million and liabilities totaling $281 million.

Blank Rome business restructuring and bankruptcy partners Michael DeBaecke and Jason Staib in Wilmington are serving as counsel to Midway. In New York, Blank Rome corporate partners Jeffrey Siegel and Pamela Flaherty and bankruptcy partner Marc Richards are advising the company.

Dewey & LeBoeuf has been retained to serve as counsel to Midway's board of directors in the Chapter 11 case. Neither firm had yet to file billing information with the bankruptcy court.

Some other engagements on our Chapter 11 radar:

Aleris International

Aluminum producer Aleris International announced on Friday that it was filing for Chapter 11 in U.S. bankruptcy court in Delaware. Aleris, which is owned by Forth Worth-based private equity giant TPG Capital, has secured nearly $1.1 billion in debtor-in-possession financing.

The bankruptcy court has not yet approved the financing plan, which calls for a new $500 million term loan and $575 million revolving credit facility. The company's international operations were not included in the bankruptcy filing.

Business finance and restructuring partners Stephen Karotkin and Debra Dandeneau at Weil, Gotshal & Manges are serving as Chapter 11 counsel to the Beachwood, Ohio-based company.

Aleris also is being advised by Fried, Frank, Harris, Shriver & Jacobson. Restructuring and bankruptcy partner Paul Heath from Delaware's Richards, Layton & Finger is serving as local counsel.

Billing information from the firms had yet to be filed with the bankruptcy court.

Charter Communications

The Midway and Aleris filings are mere appetizers compared with this week's big enchilada of bankruptcy news--that Charter Communications will declare itself legally insolvent by April 1.

With more than five million subscribers in 40 states, St. Louis-based Charter is the nation's fourth-largest cable television provider. But the company is also saddled with $21 billion in debt--making its debt load roughly $4,000 per subscriber.

As a result, Dow Jones Newswires reports, Charter will enter a prepackaged bankruptcy as part of an agreement with debt holders to reduce debt by $8 billion.

Kirkland & Ellis has been serving as restructuring counsel to Charter, which has also hired attorney and turnaround expert Gregory Doody to advise the company. Doody helped successfully reorganize Houston-based power producer Calpine after it filed for bankruptcy three years ago.

Skadden, Arps, Slate, Meagher & Flom is serving as counsel to Charter's chairman, billionaire Paul Allen, who holds a controlling stake in the ailing company. Allen will remain as an investor and retain the largest voting interest as part of an agreement with debt holders.

Earlier this week Charter settled a $150 million malpractice suit with Irell & Manella. Charter had accused the firm of making "critical errors" during its $3.1 billion acquisition of Bresnan Communications in 1999. Terms of the settlement were not disclosed.

Pliant Corporation

Privately owned Pliant announced on Wednesday that it would file for Chapter 11 protection in U.S. bankruptcy court in Delaware. The filing marks the second in recent years for the manufacturer of flexible plastic packaging and film. Pliant previously sought bankruptcy protection in January 2006--it emerged six months later--due to the increased costs of raw materials and shortages caused by Hurricane Katrina.

Pliant stated that it had a "prenegotiated" restructuring plan that would allow the company to eliminate its high-yield debt and access $75 million in interim financing.

Larry Nyhan and James Conlan, cochairs of the corporate reorganization and bankruptcy group at Sidley Austin, are serving as lead counsel to Schaumburg, Ill.-based Pliant. The firm billed Pliant for nearly $11.4 million in fees and $515,000 in expenses during its last six-month stint in Chapter 11.

Robert Brady, chair of the bankruptcy and corporate restructuring section at Delaware's Young Conaway Stargatt & Taylor, is serving as local counsel to Pliant along with bankruptcy partner Edmon Morton.

The firms had yet to file billing information with the bankruptcy court.

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