Mortal Kombat - Midway cut 25 percent of staff

Midway Games, the video-game maker sold this month by Sumner Redstone, will eliminate 25 percent of its work force and suspend development of some titles to scale back expenses as the company works to repay creditors.

Midway, based in Chicago, will have severance costs of about $1.6 million for 180 workers and will close its Austin, Texas, studio, according to a regulatory filing today. The suspended games were planned for release in 2010 or 2011 and hadn’t been announced publicly, according to a Midway statement.

Redstone announced on Dec. 1 the sale of his 87 percent stake in the maker of the “Mortal Kombat” video games for $100,000. Following that move, Midway said owners of $150 million of its debt may demand repayment. The company said today it will have about $20 million in costs related to the accelerated repurchase of its 6 percent and 7.25 percent notes.

“Midway has cash issues, has debt to repay in January, and has to conserve its cash as much as possible,” Michael Pachter, a Los Angeles-based analyst for Wedbush Morgan Securities, said in an e-mail. “These steps should have been expected, however unfortunate.

Midway rose 3 cents, or 16 percent, to 22 cents at 4:01 p.m. in New York Stock Exchange composite trading. It has fallen 92 percent this year.

Redstone, 85, is chairman of CBS Corp. and Viacom Inc. A drop in their shares this year triggered debt covenants at the family holding company, National Amusements Inc., that forced him to sell $233 million in nonvoting stock of the New York- based media companies.

The sale of Midway will give National Amusements tax losses of more than $800 million, a person familiar with the matter said at the time. A portion of those losses can be used to offset taxable income in the future, the person said.

Source: Bloomberg