ATLUS’ Mother Company Index Corporation Files for Bankruptcy (But it’s Not as Bad as it Sounds) (UPDATED)

Giuseppe Nelva June 27, 2013 4:42 AM EST

Today brings partially sad news for JRPG lovers. During a meeting of the board of directors Index Corporation, that fully owns the prominent Japanese developer Atlus announced that it filed for Civil Rehabilitation (Minji Saisei), one of the Japanese equivalents of a Bankruptcy procedure. The petition was accepted by the Tokyo District court.

The official website of the company is down at the moment, but we can still access the cached version of the announcement document here.

Reading the document we learn that the company has liabilities amounting to 24.5 billion yen (about 25 million dollars). While Index saw stable profit from its digital game business, acquisitions of domestic and overseas companies weren’t as profitable. In addition to that the Incubator Bank of Japan, on which many small businesses relied, went bankrupt, this affected many companies participating in Index’s network.

Many loans granted to those smaller companies became non-collectable, and this worsened the conditions of the main company, creating a tight funding situation that involved uneasiness in supplier companies and financial institutions, leading to the bankruptcy filing announced today.

Luckily the situation is not as bad as it sounds, and this shouldn’t mean the cancellation of upcoming titles or the closure of the ATLUS (or ATLUS USA) brand.

Japan has two main bankruptcy procedures, Civil Rehabilitation (Minji Saisei) and Corporate Reorganisation (Kaisha Kosei). The second is kind of similar to the American Chapter 7 Bankruptcy (the bad one), while the first is similar to Chapter 11.

What it means is that Civil Rehabilitation (which is what Index Corporation filed for) is a Debtor in Possession proceeding where the debtor retains the full right to operate the business and/or to dispose of its assets while the debt is repaid, as opposed to the Corporate Reorganisation in which the company loses the right to independently operate.

The official document does specify that in the future the company will continue its business under the supervision of the director and the commissioners court, in order to improve its financial situation and rebuild the company’s coffers, also thanks to the strong earnings from the digital market.

The income from the mobile business and social games is expected to grow further and to provide support to the whole company, that will continue to restructure and rebuild its business in collaboration with financial institutions and business partners. Index is also looking to find investors or buyers for the business as soon as possible to improve the situation before there’s a chance of a deterioration of the financial situation.

In conclusion, while Index corporation did file for bankruptcy, the Civil Rehabilitation process should not influence ATLUS or its video game business majorly, as operation is allowed to continue as usual while investors are found. Considering that the core video game area of the company is solid and profitable, that shouldn’t be an enormous problem as this kind of business is normally quite attractive for investors and buyers.

We might see a further shift of resources towards mobile and social games (but this is just my personal speculation based on what the document says), but our beloved JRPGs should remain mostly unaffected for the time being.

UPDATE: Atlus took it to Twitter to reassure fans on the fact that releases scheduled for the immediate future will proceed as scheduled.