Atari US files for bankruptcy to break from parent

NEW YORK (AP) - Video game maker Atari's United States (US) operations have filed for bankruptcy protection in an effort to separate from their French parent company, which is filing a similar motion separately in France.

In a statement, Atari says the move is necessary to secure investments it needs to grow in mobile and downloadable video games.

Atari, which turned 40 last year, was a videogame pioneer with games like Pong and Centipede, but has changed ownership several times amid financial problems.

Atari's US operations have shifted to focus on digital games and licensing, including developing mobile games, and they have become a growth engine for its owner. France's Infogrames Entertainment first took a stake in Atari in 2000. It acquired the remaining stake in 2008 and changed its name to Atari S A.

But the US operations have been performing better than the rest of the company. In fiscal 2012, digital and licensing revenue both grew significantly and contributed 70 per cent of revenue, while sales in bricks-and-mortar stores declined.

In December, Atari S A said a credit agreement it entered into with investor BlueBay - its main shareholder and only lender - would lapse at the end of the year and the company was seeking other ways to raise capital. It added that it expects to report a "significant loss" for fiscal 2012.

On Monday, Atari S A said it and its European operations would file related bankruptcy procedures in France concurrent with the US bankruptcy filing.

Chief executive officer Jim Wilson said the moves were the "best decision to protect the company and its shareholders". The auction process in US bankruptcy proceedings will "maximize the proceeds" going to shareholders, he added.

Creditors include accounting firm Deloitte & Touche, and retail stores Kmart and Wal-Mart Stores, although none are owed more than US$250,000 (S$307,000). Blue Bay is not listed as one of the US operations' creditors.

In its filing with the US Bankruptcy Court in the Southern District of New York, Atari said it had US$1 million to US$10 million in assets and US$10 million to US$50 million in debt. It is seeking approval for US$5.25 million in debtor-in-possession financing from investment firm Tenor Capital Management.

Atari said it expects to sell its assets or confirm a restructuring plan within the next three to six months.

Atari S A, which trades on the Euronext Paris market of NYSE Euronext, has requested trading of its shares be suspended.