While filing for bankruptcy in the U.S. is typically an act taken by companies in significant financial trouble, it's being adopted as an escape mechanism by the U.S. divisions of Atari. Atari Inc, Atari Interactive Inc, Humongous Inc and California US Holdings Inc have all collectively filed in New York, with the peculiar goal of escaping its parent company in France.
In simpler days, notably the 1970s and early 1980s, Atari was a company that dominated and defined the video game industry. As many no doubt already know it was also victim to the so-called industry crash in 1983, while some will argue that it was a collapse in confidence brought on by poor quality control and licencing from the platform holder. In any case, a number of unsuccessful system releases followed in the era of SEGA and Nintendo's console wars, with the company eventually giving up and retiring to focus on software. After changing hands multiple times the company was bought by Paris-based Infogrames, which changed it's name to Atari SA in May 2009 to avoid branding confusion.
Atari is, unsurprisingly, not the profitable behemoth it was in its pomp, and despite profits in the last couple of years an issue with London-based financial company BlueBay Asset Management has prevented developed projects from proceeding to release so far this year. With the operations of Atari being U.S. based but reportedly hampered by issues with the parent company in Paris, this is a bid to sever that link and then continue work as normal. The U.S. operations said the following in a press release.
The chapter 11 process constitutes the most strategic option for Atari's US operations, as they look to preserve their inherent value and unlock revenue potential unrealized while under the control of Atari SA. During this period, the company expects to conduct its normal business operations.
The US companies are also seeking approval to obtain $5.25 million in debtor-in-possession financing from one or more funds managed by Tenor Capital Management, a firm specializing in convertible arbitrage and special situations. Each unit has filed a number of traditional "first-day" pleadings, which are intended to minimize any disruption of their day-to-day operations.
It's not often that major divisions within a company file for bankruptcy to escape those with overall ownership; this is Atari, however, and here we have another curious chapter in its rich and varied history.