PROVIDENCE, R.I. (CBS Connecticut/AP) — Former Red Sox pitcher Curt Schilling asked Rhode Island for additional help to save his video game company Wednesday, prompting state leaders to consider whether the firm is viable enough to justify further investment.
Schilling briefed Gov. Lincoln Chafee and the state’s Economic Development Corp. board in a closed-door session.
Following the meeting, Chafee would not say what Schilling is seeking from the state. The governor said the question before state economic development officials was, “How do we avoid throwing good money after bad?”
Schilling declined to answer questions, saying only: “My priority right now is to get back to my team.” According to Baseball-Reference.com, Schilling made nearly $115 million from his playing career.
Concerns about 38 Studios’ financial health arose when it failed to make a scheduled $1.1 million payment to the Economic Development Corp. on May 1.
The business was lured from Massachusetts in 2010 after Rhode Island offered a $75 million loan guarantee that state officials said would help bring hundreds of jobs and millions in tax revenue.
No action was taken on 38 Studios’ new request. The board’s next scheduled meeting is Monday.
Chafee, an independent, has vowed to do “everything possible” to assist the company, named after Schilling’s number as a player, and prevent the state from having to pay the company’s debts.
“The most important thing, going forward, is the viability of the company,” said Chafee Tuesday. “We’re looking at everything.”
House Speaker Gordon Fox said he began hearing “inklings” about trouble at the company a few weeks ago, but still doesn’t have the necessary information to gauge the company’s health.
Under the terms of the loan guarantee agreement, 38 Studios promised to bring to Rhode Island a total of 450 jobs over three years. An outside monitor was to follow the company’s progress.
The company released its much-anticipated first game, “Kingdoms of Amalur: Reckoning,” to strong reviews in February.
Chafee and others criticized the loan guarantee at the time it was offered, saying it was putting taxpayer money at risk to help a company with no track record of success. During his run for governor, Chafee called it “one of the biggest risks I’ve ever seen.”
Economic Development Corp. Executive Director Keith Stokes said at the time the board determined the loan agreement was a calculated risk well worth taking. Stokes said the board performed months of due diligence in analyzing the video game sector and 38 Studios and crafted a loan guarantee agreement that included strict performance benchmarks.
He said the agreement went “to great lengths to safeguard taxpayers and ensure economic performance.”
A 2010 memorandum prepared by the state says company was working in Massachusetts on developing a massively multiplayer online game dubbed “Copernicus.”
The initial target market size for the game was estimated to be $3.2 billion in net revenue in North America and $1.6 billion in western Europe, the memo said.
Still, the memo acknowledges that the video game business, is “highly speculative and inherently risky.” It says the market for massively multiplayer online games is dominated by “World of Warcraft,” but that some of its competitors have been “commercially successful” despite being unable to match the game’s subscription figures.
Four months before economic development officials held a bond sale to raise money for 38 Studios, the company took out a revolving line of credit of $2.5 million to support its operations, the memo said.
The credit line was to be capped at $4 million and was secured by Schilling, the memo said. The company anticipated that all or a portion of the bond proceeds would be used to pay down the outstanding amounts on the credit line.
Two months later, the company took out a 120-day credit line worth $3 million that was expected to be paid down with the bond proceeds, the memo said.
Under legislation passed in 2010, the General Assembly created a program giving the economic development agency the authority to back up to $125 million in loans to businesses promising to create permanent, full-time jobs.
The loans would come from lending institutions, not the state, but Rhode Island would agree to repay the lender if a company defaulted.
The corporation issued bonds in 2010 and set aside the proceeds of the bond sale for 38 Studios to tap when the company met financial milestones.
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