Curt Schilling put up $5m in gold as collateral for loan
Personal assets not enough to save 38 Studios
Former Red Sox pitcher Curt Schilling says he poured much of his personal fortune into his Providence video game company — and that apparently included a stash of gold coins.
In February, the day after 38 Studios released its first game, Schilling posted 3,200 gold coins — worth roughly $5 million at current prices — as collateral for a loan from Bank Rhode Island in Providence, according to financing statements filed in Massachusetts.
The documents do not specify the size of the bank loan or its intended purpose, and the only debtor listed on the forms is Schilling, not his company. However, in an interview with the Providence Journal, published this week, Schilling said his investment in 38 Studios totaled $50 million, including $12 million in loans that he personally guaranteed.
The 1-ounce coins, some 200 pounds of South African Krugerrands, Canadian Maple Leafs, and American Eagles, were stored at Coins N Things Inc. in Bridgewater, according to the documents. Also known as CNT Inc., the metals dealer is one of the largest distributors of coins for the US Mint.
Coins N Things declined to talk about its relationship with Schilling. Bank Rhode Island said it could not comment.
However, the collateral was posted at an important period for 38 Studios. The firm released its first game, Kingdoms of Amalur: Reckoning, on Feb. 7; Schilling posted the coins as collateral the next day.
The game received good reviews and sold 1.2 million units in the first 90 days but apparently did not sell well enough to solve the companys cash crunch.
38 Studioss financial condition worsened rapidly, culminating with the May 24 layoff of its entire workforce — roughly 400 workers — after it was unable to make payroll or receive additional aid from the state of Rhode Island. The company had already burned through $49 million it received from loans that were backed by the state, which is now on the hook for repayment.
One of the more bizarre twists in the companys meltdown involved its efforts to belatedly make a $1.1 million payment to the state it had missed on May 1. After first trying to give the state a check that had insufficient funds on May 17, the company paid the government the next day.
The money was apparently advanced to 38 Studios by an investor who was planning to buy state tax credits the company anticipated receiving, according to what Schilling told the Providence Journal.
New public documents filed this week show that 38 studios put up $6.5 million in tax credits as collateral to obtain an advance from a company called Row 1 Productions LLC, in Beverly Hills, Calif. But since Rhode Island has refused to provide the tax credits to 38 Studios it is unclear how Row 1 Productions will be repaid.
The Los Angeles law firm that filed the collateral notice for Row 1 Productions did not respond for comment. Row 1 Productions could not be reached.
The firm has previously financed major movie deals, according to a news release.
Schilli ng has repeatedly declined the Globes requests for comment. However, in his most recent posting on Facebook, the former baseball star seemed increasingly resigned to the possibility his company may be dead.
I thank God to have blessed me with five years of memories, Schilling wrote on Thursday afternoon. lll never forget and a world that will never be forgotten, and greatly missed.
In the Providence Journal interview — his only extensive public comments to date — Schilling accused Governor Lincoln Chafee and other state officials of sabotaging 38 Studios by reneging on a promise to provide the company with more than $8 million in tax credits it believed it was owed, and refusing to give it more leeway to skip the $1.1 million payment or pay it late. Schilling was also upset Chafee publicly questioned 38 Studios viability.
So far, there has been no indication 38 Studios plans to sue the state, Chafee said Wednesday.
William M. Dolan, a litigation partner for the Boston law firm Brown Rudnick, said a court challenge would be difficult for Schilling if he does not have proof the state violated a binding agreement on the tax credits.
The burden of proof is on the plaintiff, Dolan said. If hes got a written contract signed by a authorized official, thats one thing. But I suspect he doesnt.