Timeline: How 38 Studios collected $49.5M from RI’s $75M loan

38 Studios laid off all its employees on Thursday, and in the subsequent coverage there’s been some confusion about how much cash the company actually got out of the $75 million loan Rhode Island’s EDC took out on its behalf. Here’s an outline of exactly when (and why) the EDC says it transferred the money to Curt Schilling and company.

Nov. 2, 2010 … $10.9 million. “Upon delivery and the Date of Issuance of the Bonds AND after the date when [38 Studios], or a letter of credit bank selected by [38 Studios], presents reasonable documentary evidence to the [EDC] that the letter of credit required in connection with [38 Studios’] execution of that Lease dated Sept. 20, 2010 is to be issued subject only to the funding of a deposit account at such letter of credit.”

• Nov. 2, 2010 … $2.1 million. “Collateralization for letter of credit that serves as the security deposit on Empire Street lease.”

• Dec. 10, 2010 … $9.4 million. “Upon public announcement by [38 Studios] of a relocation date to RI.”

• April 18, 2011 … $17.2 million. “Upon relocation of [38 Studios’] headquarters and the current object, Coperncius studio to RI AND the creation of at least 80 full-time jobs in RI with an average annual wage not less than $67,500 per year.”

• April 18, 2011 … $4.2 million. “Upon the creation by [38 Studios] of an additional 45 full-time jobs in RI with an average annual wage not less than $67,500 per year.”

• Aug. 16, 2011 … $4.1 million. “Upon the entry by [38 Studios] into a satisfactory distribution agreement for its Project Copernicus.”

• Nov. 2, 2011 … $1.6 million. “Upon the creation by [38 Studios] of at least an additional 125 full-time jobs in RI with an average annual wage of not less than $67,500 per year.”

Total … $49.5 million between Nov. 2, 2010, and Nov. 2, 2011.

When the $75 million worth of bonds were sold on Nov. 1, 2010, the EDC spent $1.9 million of the proceeds on fees, then put the rest into three accounts: $49.5 million went into the Project Fund, $12.8 million went into a Capital Reserve Fund and $10.6 million went into a Capitalized Interest Account.

As of Nov. 2, 2011, a year after the bonds got sold, the Project Fund was empty – that was the source for all the above transfers from EDC to 38 Studios. The company told the state all $49.5 million is gone, but no details have been provided about how the company spent the money.

As of now, the Capitalized Interest Account is down to about $2.7 million – enough for one more interest-only payment, which is due on Nov. 1.

Starting next May 1, 38 Studios itself is supposed to start making the principal and interest payments to bondholders from its own revenue; if it can’t do so, the EDC will tap the Capital Reserve Fund. If that happens, the governor is required to ask state lawmakers to appropriate money in the budget to replenish the fund. However, lawmakers aren’t legally obligated to actually appropriate the money.

As this September 2010 story noted, it’s important to realize that these milestones are different from the job milestones that got most of the attention when the deal was done (i.e., that 38 Studios would create 450 full-time jobs here by 2013). Collecting the bond proceeds only required 250 jobs in Rhode Island; the company will pay minor penalties separartely if it doesn’t reach the 450 mark by November 2013.

• Related: RI taxpayers actually on the hook for $112.6M with 38 Studios (May 15)

  • GaryM

    Is there any overall analysis on the history of how much taxpayers have put into the EDC vs total benefit out? EDC taxpayer grants are another part of this equation.

    There is a wind farm consortium in the East Bay that is about to be placed under the EDC (see S2870).


    In 2011, the record shows that an EDC grant in the amount of $335,000 was given to this consortium. The consortium records show that there is still no wind tower, and most of the money was spent on lawyers and PR expenses.

    Now this money losing consortium wants to be placed fully under the EDC through legislation. The lawyers and PR folks are all in favor of the legislation. Taxpayers aren’t aware of this.

    Will we ever learn?

  • MC

    The budget for the edc has been about $17 Million per year. They currently have a staff of 100. (After the downturn the staff was cut 25% but the budget was increased)

    The folks I know at the EDC are a bunch of morons.

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    […] should be the role of Rick Wester, 38 Studios’ Chief Financial Officer. At some point – and apparently 38 Studios told Rhode Island officials in November 2011 that they’d spent all … – it had to have been clear that the studio was in financial trouble. Yet hiring of new staff […]

  • YRI

    I’m still waiting for our lamestream media to actually delve into why this state should even be allowed to risk taxpayer money on what otherwise is and should be economic decisions made by the private sector. What evidence… historical evidence … that should give us confidence in political judgments? Limiting what politicians can do to us has a better chance of succeeding. Those folks who are believe in the twaddle of politicians/government creating the “fair” society should pay attention to how European countries have been and are doing themselves in with this approach. Or they might want to try California… the Greece of the USA. What we should be concentrating on is limiting state spending,state taxes and fees, and getting as much government out of our face,out of our pockets, and off our backs. Meanwhile, what’s going to happen with that so called “free” state surplus? I’m not holding my breath for any of our fifth rate media to go after this topic. They’re much too busy carrying the water for this state’s governing political culture.

  • Rlewis

    Can anyone from the Tea Party put together a coherent sentence?

    • Ed

      Can a Rhode Island Democrat work in the private sector instead of thinking they are owed a living?

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