Atari has filed for Chapter 11 bankruptcy, but only to sever its financial ties with its French parent holding company Atari S.A. and have a fresh start.
The American Bankruptcy Code identifies two different types of bankruptcy: Chapter 7 bankruptcy and Chapter 11 bankruptcy. In Chapter 7, the business ceases operation and a trustee sells all of its assets then distributes the proceeds to its creditors. Any residual amount is returned to the owners of the company. In Chapter 11, the debtor usually remains in control of its business operations as a debtor in possession, and is subject to the oversight and jurisdiction of the court
As part of the Chapter 11 bankruptcy process, Atari Inc. and its other U.S.-based companies, including Atari Interactive Inc., Humongous, Inc. and California US Holdings, are looking to sell all of their assets within the next 3 to 4 months. Assets put up for sale include some long term classics such as Pong, Asteroids, Centipede, Missile Command, Battlezone, Tempest, Test Drive, Backyard Sports and Humongous.
French developer Infogrames bought Atari in 2008 before it changed its name to Atari S.A. a year later. Four years later, the American branch (a.k.a. the original Atari) believes that its new focus on digital games has turned it into "a growth engine," that goes "unrealized while under the control of Atari S.A."
As part of the filing, Atari is looking to receive $5.25 million debtor-in-possession financing from financial investment company Tenor Capital Management.