4Kids Entertainment files Chapter 11


To head off a lawsuit seeking to cancel its Yu-Gi-Oh! license, 4Kids Entertainment has filed for protection of the US Bankruptcy Court in Manhattan. 4Kids produces the Saturday morning kids block on The CW network.

The 4Kids bankruptcy filing automatically stays the lawsuit filed March 24th by the licensors of the Yu-Gi-Oh! property, Asatsu-DK Inc. and TV Tokyo Corporation, pending action by the bankruptcy court.

“We have made every effort to reach agreement with the Licensors. When the Company did not receive a positive response from Licensors to its settlement proposal, the Board of Directors was left with little choice but to authorize the filing of a bankruptcy petition under Chapter 11 in order to best preserve the business and assets of 4Kids Entertainment. We continue to believe that the purported termination of the Yu-Gi-Oh! Agreement was wrongful and that 4Kids’ assessment of the audit claims will be vindicated in court. If the Court rules in favor of the Company, 4Kids will pursue the full measure of damages for the significant injury the Licensors have caused to the business of 4Kids,” said a statement from 4Kids interim Chairman Michael Goldstein.

He said operations will continue normally while the company is in Chapter 11. “The Company will also continue to explore its strategic alternatives, including, the possible sale of the business or reorganization as a stronger and more focused company,” Goldstein said.

4Kids is a publicly traded company, with its shares trading on the “pink sheets” since losing its NYSE listing last year. The stock actually rose to 15 cents in Thursday’s trading, having previously closed at nine cents.

4Kids recently reported that 2010 revenues were $14.5 million, down from $34.2 million in 2009. Its net loss, however, decreased to $27.2 million from $42.1 million.

The bankruptcy filing lists The CW as the third largest creditor, with a disputed claim of nearly $2 million against 4Kids. The Yu-Gi-Oh! licensors claim $4.2 million, but the biggest claim, also in dispute, is $4.7 million claimed by The Pokemon Company International. The filing estimates that 4Kids has assets in excess of $10 million.