While the Japanese economic structure is different than the American structure, it is apparent that Index Corp. is going through what would be the equivalent of what is known as a restructuring or chapter 11 bankruptcy. This comes off a tumultuous month where the company went under investigation for improper book keeping due to a belief that the company was selling off assets and then purchasing them back up at the same price in order to inflate profit margins. If true, this is shady stuff. Currently the SEC is still looking in to this.
Earlier last month the company had reported that they expected an operating loss of ¥2.263 billion (roughly $27 million dollars) for the quarter that ends August 31st. That was last month. In a new report from the company, they have listed their current debt at ¥24 billion (roughly $250 million). The company no longer feels that it can manage this debt and has decided to look to the courts to stop and control all prior bills. This is where the restructuring comes in. Restructuring is a freezing of debts into a structured payment plan. If Index can’t pay those debts, this means they need to get an influx of cash from somebody that wants to invest in the company. If not, they’ll default on their restructuring schedule and that will push them in to the more serious bankruptcy roles.
For those of you wondering where Atlus and Madhouse sit within all this, its murky. The company is still touting its video games industry as a point of focus for the future. This makes sense as recent releases like Shin Megami Tensei IV and the Persona series have done well for Index Corp. The plan is still to rely upon mobile social games and console games for the time being as they work to get out of debt, but if they are looking for outside sponsors, it’ll be interesting to see what the company is willing to wager up as collateral. Will they split the company up or will they be looking to merge if they can’t reorganize the debts? There is a note about the board of directors paving the way for President and Chairman Masami Ochiai’s resignation from the company, but what that holds for the future state of the company is unclear right now.
The next few months should be interesting for Atlus, Madhouse and their parent company.