DIGITAL MEDIA

38 Studios makes $1.1M payment

BLOOMBERG FILE PHOTO/SCOTT EELLS
CURT SCHILLING, founder of 38 Studios LLC and a former Boston Red Sox pitcher, speaks during an interview in New York, U.S., on Monday, Feb. 13, 2012.
Posted 5/18/12

(Updated, 4:55 p.m.)

PROVIDENCE – Still without the cash to pay its workers, 38 Studios LLC made its overdue $1.125 million payment to the state Friday to satisfy obligations of the company’s $75 million taxpayer-baked loan, Gov. Lincoln D. Chafee said.

A day after handing the R.I. Economic Development Corporation a check and admitting it would bounce, the teetering Providence video game company Friday made a wire payment for $1,025,000, Chafee said, and a separate check for $100,000 – that cleared.

But vowing to prevent the company - owned by former Red Sox pitcher Curt Schilling - from receiving any additional assistance, Chafee, who opposed the loan guaranty as a candidate, said he would do anything under the law to make sure 38 Studios does not get up to $14.1 million in film tax credits it has applied for over two years.

Chafee proposed legislation that would bar any company receiving state aid from using it to get more state aid, but acknowledged it would be too late to stop 38 Studios from getting money it has already applied for.

Addressing around two dozen reporters Friday afternoon at the Statehouse, Chafee said he had urged Schilling to relinquish control of the company to private investors in exchange for capital to keep the firm afloat.

“Of course,” Chafee said when asked if he had asked Schilling to give up control of 38 Studios, adding that the former hurler’s reluctance to give up power “seems like part of the problem.”

38 Studios applied for state film tax credits in 2011 and 2012.

The 2011 request, which would be worth $2.1 million, is still being reviewed by the state film office, which has not identified any eligibility problems, state officials said.

The 2012 application – for $12 million – was pushed to the back of the line due to the fee-payment default.

Chafee said 38 Studios has been trying to sell proceeds of the film tax credit to investors in anticipation of receiving it.

The $75 million state loan guarantee, of which 38 Studios has received $49.5 million in cash - the rest went to reserve accounts and the cost of floating the bonds - was intended to fund the development of a massively multiplayer online game code-named Project Copernicus.

Chafee said he had been told that the expected release of Copernicus is now June of 2013, after payments in November and May 2013 will be due.

Although he understood that the company did not make payroll this week, Chafee said he had not received any reports of layoffs at the company, which employs around 300 workers in Providence.

On Thursday, 38 Studios tried to pay its late fee payment with a check officials admitted would have bounced, R.I. Economic Development Corporation representatives said.

After hearing that 38 Studios’ checks were no good, the EDC gave back the attempted payment and told the company to return when there was enough money in the company’s accounts to cover it.

The $1.125 million guarantee fee, which is 1.5 percent of the outstanding loan amount, was due May 1.

Schilling has declined to answer questions about 38 Studios since financial trouble at the company was revealed at the beginning of the week, but on Friday morning broke his silence on Facebook to signal his intention to fight on.

“To all the prayers and well wishes to the team and families at 38, God Bless and thank you! We will find a way, and the strength, to endure,” Schilling posted.

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