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)