Reuters: Regulatory News: UPDATE 2-Schilling video game company declares bankruptcy

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UPDATE 2-Schilling video game company declares bankruptcy Jun 7th 2012, 20:28 Thu Jun 7, 2012 4:28pm EDT * 38 Studios laid off about 400 employees last month * Chapter 7 filing shows intent to liquidate * Schilling's company got $75 mln loan guarantee from RI By Ros Krasny and Jonathan Stempel BOSTON/NEW YORK, June 7 (Reuters) - The video game company owned by former Boston Red Sox pitcher Curt Schilling filed bankruptcy papers o n T hursday, less than two years after it won a $75 million loan guarantee from Rhode Island, and federal and state agencies may be investigating the company, 38 Studios. The Chapter 7 filing indicates that the Providence-based company plans to liquidate. Last month, 38 Studios decided to lay off most of its roughly 400 employees. It recently had its funding cut by Rhode Island, which had been its major financial benefactor. The company said it had $21.7 million in assets, mostly personal property, and $150.7 million in liabilities, including $115.9 million owed to Rhode Island. Schilling owns an 82.9 percent stake in 38 Studios, a court filing shows. The company's name derives from Schilling's baseball uniform number. "This action comes after several weeks when the company has reviewed, considered and received the recommendations and advice with respect to potential avenues for relief that are currently available," the company said in a statement. "After ongoing negotiations with the State of Rhode Island and potential investors and other interested parties, the company has been unable to find a solution to the current stalemate." Jim Martin, a spokesman for the U.S. Attorney's office in Providence, said his agency had "been in touch with the FBI and the Rhode Island State regarding 38 Studios" but declined to comment further. Officials from 38 Studios did not respond to calls and emails for additional comments. Schilling's company received a $75 million taxpayer-backed loan guarantee from Rhode Island in 2010, as an incentive to move its headquarters, and hundreds of well paying jobs, to Providence from Maynard, Massachusetts. It had received almost $50 million of those funds through late May, the state has said. In May, 38 Studios was more than two weeks late on a $1.4 million loan repayment to the state and failed to make payroll. The liquidation could leave Rhode Island holding the collateral pledged against 38 Studios' loan. This includes current and future rights to "Kingdoms of Amalur: Reckoning," a video game launched in February, and to an elaborate, multi-player game code-named "Project Copernicus," which has had a tentative 2013 release date. Rhode Island Governor Lincoln Chafee, who opposed the 38 Studios deal when he ran for office in 2010, will hold a press conference in Providence at 4:30 p.m. EDT on Thursday to discuss the developments. In an interview with Reuters this week, Chafee called the 38 Studios fiasco "a black eye" for the state. "I hope we never make any kind of mistake like that again," Chafee said of the loan guarantee. "It just defied all common sense You look back, how could it have happened?" Several members of the Rhode Island Economic Development Authority, the body which approved loan to 38 Studios, have resigned in the past month. A vocal backer of conservative politicians, Schilling has avoided talking to media in recent weeks, though he has at times taken to Facebook to praise the "resilience" of his company. He was not immediately available for comment on Thursday. Schilling, 45, was a six-time All-Star and won three World Series championships with the Red Sox and Arizona Diamondbacks. In 2004, he became known for pitching a game with blood stains on his sock after a procedure on his injured ankle, as he helped the Red Sox bring a World Series championship back to Boston for the first time in 86 years. Schilling last pitched in the major leagues in 2007, and ended his career with a 216-146 record, a 3.46 earned run average and 3,116 strikeouts. The case is In re: 38 Studios LLC, U.S. Bankruptcy Court, District of Delaware, No. 12-11743. Link this Share this Digg this Email Reprints

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