UPDATE: Financial news outlets are reporting that Viacom Chairman Sumner Redstone is starting to try to unravel his financial mess. He sold his 87% stake in video game maker Midway Games for a mere $100,000. Why so low? To help restructure debts that threaten his family business. Bloomberg says Redstone, the owner of CBS Corp. and Viacom Inc authorized the sale to private investor Mark Thomas because it will provide tax benefits as Redstone negotiates new lending terms for an $800 million loan to his National Amusements Inc. holding company. As part of the deal, Thomas will also assume a separate $70 million debt Midway owes to National Amusements, according to a regulatory filing today.

Tax benefits should help Redstone refinance the National Amusements debt coming due this month and avoid selling more shares of Viacom and CBS. (Redstone already sold $233 million in non-voting shares of CBS and Viacom in October to meet debt covenants.) Bloomberg reported that, with the sale of Midway, National Amusements will realize a 2008 tax loss of more than $800 million. The company can use a portion of the loss to offset income earned this year and receive a tax refund. National Amusements can carry forward any unused balance of the loss for five years to offset future taxable income. The 85-year-old Redstone keeps shedding assets in an effort to refinance the $800M loan, which comes due this month, that’s half the $1.6 billion in debt he’s incurred because of losses in the value of his controlling shares of CBS and Viacom used as collateral. Everyone knows he is considering selling National Amusements’ theater chain and maybe even his stake in CBS. On November 13, Redstone said no more shares of CBS or Viacom would be sold. But my own sources within Viacom have been speculating for two months that Redstone may have no choice but to unload CBS, even though CEO Les Moonves keeps assuring his own board of directors that won’t happen. But how can Moonves be so sure? This is Redstone, after all — one of the entertainment industry’s most mercurial moguls. If he told me what time it is, I’d still check a clock.

Midway closed November 28th at 38 cents a share, valuing Redstone’s stake at $30.5 million. Thomas will pay 0.12 cent a share for the stock, according to a regulatory filing today. But the NYSE has been warning that it may delist Midway because the Chicago-based maker of Unreal Tournament 3 and Mortal Kombat hasn’t maintained an average market value of at least $75 million over 30 days. Midway shares have declined 86% this year and the company has lost money every quarter for the past four years. But the share price really hit the skids in October. Geez, it wasn’t long ago that other media moguls were envious of Redstone for having the foresight to invest in videogames — which he once boasted were “the hottest part of the entertainment industry” – while Wall Street hided him for adding them not to Viacom’s but to his personal portfolio. Now it’s nothing but a tax loss play.

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