Atari US files for Chapter 11 bankruptcy

The U.S. arm of video game maker Atari S.A., best known for creating Pong and Asteroids, filed for Chapter 11 bankruptcy in New York this evening, the L.A. Times reports.

According to the report, Atari Inc. and three of its affiliates filed petitions for Chapter 11 reorganization in an effort to "break free" from their French parent company, Atari S.A., who is believed to be in debt. A source close to the L.A. Times said that the American business hopes to free itself from its parent company so that it can be bought privately and grow as a business that focuses on digital and mobile platforms. If Atari Inc. is successful in its bankruptcy filing, the L.A. Times reports that it could emerge with its own resources and without or with little of the debt its parent company has accrued.

In a statement from Atari, the company expects to sell its assets over the next 90 to 120 days, which includes Pong, Asteroids, Centipede, Missile Command, Battlezone, Tempest, Test Drive, Backyard Sports and Humongous. The U.S. companies are in addition looking to obtain $5.25 million in debtor-in-possession financing from funds managed by the firm Tenor Capital Management.

The company has been experiencing enormous financial losses over the past few years. Despite releasing an updated version of Pong and a "greatest hits" compilation of its most-loved arcade titles, the company's revenue fell by 34 percent in the 2012 fiscal year and by a whopping 43 percent in the 2011 fiscal year. Profits have also been small, with $11 million profited in the fiscal year of 2012 and $4 million in 2011. Atari S.A.'s shares have also dropped from more than 11 Euros in 2008 to less than 1 Euro today.

The L.A. Times reports that the company's growth potential has been hampered by its reliance on London financial company BlueBay Asset management for cash, which meant that when a credit facility valued at $28 million lapsed on Dec. 31, 2012, Atari was left without the resources to release the games that are currently in development.

2012 was a busy year for Atari after it announced a competition for independent developers to create a Pong-inspired game to celebrate Pong's 40th anniversary. It also announced a partnership with Zynga, where the social game developer would publish the game developed by the winner of the competition. Late last year the company announced its mobile line-up, which included RollerCoaster Tycoon, Dungeons and Dragons, Centipede: Origins and Outlaw. Atari Casino — a free-to-play casino game — was also announced and is believed to be one of the titles that has been affected by the BlueBay Asset credit lapse.

The Atari brand has undergone many mergers and acquisitions in its 31 year history. The original Atari Inc. was split in 1984 and its arcade division was turned into Atari Games Inc., which also held the rights to the company's logo and brand name. It merged with JT Storage in the 1990s before being bought by Hasbro Interactive in 1998. Infogrames Interactive SA (IESA) then bought Hasbro Interactive in 2001 and renamed it. IESA then changed the company name to Atari Interactive in 2003. The U.S. company that is now known as Atari Inc. was formerly GT Interactive. IESA acquired a majority stake in the company in 1999, renamed it Atari Inc. in 2003, and completed the acquisition in 2008.

We have reached out to Atari for comment. We will update this story as more information is available.

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