38 Studios Bankruptcy Hearing Begins Today: Company Owes $150 Million
Tuesday, July 10, 2012
The first bankruptcy hearing for the defunct video game company founded by former Red Sox ace Curt Schilling will take place in Delaware today as a federal judge begins to sort out which creditors will receive what’s left of the company’s assets.
38 Studios filed for bankruptcy last month several weeks after it laid off every single employee in its offices in Providence and Baltimore. The company cash-flow problems first came to light when it defaulted on a $1.125 million payment due to the state’s Economic Development Corporation (EDC) in May.
The company, which has less than $22 million in assets, owes just over $150 million to over 1,000 mostly-unsecured creditors, court records show. The state is the largest secured creditor at $115.9 million.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe largest unsecured creditor is Providence lawyer Michael Corso, whose Preservation Credit Fund LLC is owed more than $11 million. Early this year, Corso, the state’s top tax credit broker, pledged over $14 million in film tax credits which hadn’t yet been issued as collateral to secure over $8 million in loans from BankRI to help keep 38 Studios afloat. State and federal authorities are currently investigating that loan.
Schilling moved his company to the Ocean State from Massachusetts after receiving a $75 million loan guarantee from EDC in 2010. Earlier that spring, the General Assembly jammed through legislation that helped that EDC’s Job Creation Guaranty Program grow from $50 million to $125 million. Lawmakers have said they had no idea the money would end up going to one company.
During its short time in Rhode Island, the company flew under the radar, mostly not responding to requests for comment other than when they opened their downtown headquarters in 2011.
Governor Chafee, who Schilling has blamed for helping to kill a multi-million deal that could have saved the company, said he only became aware of 38 Studios’ financial woes in April of this year. The company was attempting to receive about $14.3 million in tax credits to stay afloat, but after defaulting on its payment to EDC, it became ineligible for the credits.
Schilling has taken to talk radio and his Facebook page to criticize the way the state publicized his company’s financial problems. He has claimed Chafee, who told Channel 10 the state was trying to keep the company solvent in May, scared away potential investors. During his 2010 gubernatorial run, Chafee was an outspoken critic of the deal.
Now very little is left of the company, which released its first game, “Kingdoms of Amalur: Reckoning,” earlier this year. The game sold over one million copies, but Chafee has called it a “flop.”
U.S. Bankruptcy Court Judge Mary Walrath will oversee the hearing today while Thomas Carlotto and Jonathan Savage will represent the state of Rhode Island. Laura David is the attorney for 38 Studios. Jeoffrey L. Burtch is court-appointed trustee.
Dan McGowan can be reached at [email protected].
Dan McGowan can be reached at [email protected].
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