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Curt Schilling's Video Game Company 38 Studios Defaulted on $75 Million Loan From Rhode Island [UPDATE]

Curt Schilling’s video game company 38 Studios is having severe financial difficulties. Unfortunately, it’s not just his problem. 38 Studios received an incredible $75 million in guaranteed loans from Rhode Island as part of a job creation deal. The company cannot meet its payroll and defaulted on a $1.1 million loan payment.

On Wednesday, the state economic development official who oversaw the loan guarantees resigned abruptly. In a bizarre twist, at one point Thursday, company representatives hand-delivered a check to the Rhode Island Economic Development Corporation, apparently to cover the late $1.1 million payment, but then later said the company had insufficient funds to cover it.

38 Studios owes $5.3 million for the rest of the year in loans and interest and $12.7 million per year through 2020. The financial problems come despite the company selling around a million copies of its $60 role playing game “Kingdoms of Amalur.”

According to the Boston Globe, Schilling invested $30 million of his own money. Before the Rhode Island deal he had difficulties raising the $48 million in venture capital he was seeking.

“More than one VC who has met Schilling has come away with the impression that an investment would require quite a bit of ‘babysitting,’ ’’ noted a trade publication, Private Equity Week, at the time.

Their business projections were just a tad optimistic.

He had massive ambitions. The company promised each of its original 37 employees a bonus of $1 million if 38 Studios reached $1 billion in value, a huge stretch for a start-up. By comparison, Warner Bros. agreed to pay as much as $160 million for Turbine Inc., one of the Boston area’s largest established video game companies.

Why did Rhode Island get involved and commit $75 million? The Sawx, basically.

“I had heard rumors that both the governor and House leadership were desperate to cut a deal with Schilling,’’ Watson said. “Nobody was admitting to anything at the time. Frankly, Keith Stokes [director of the Rhode Island Economic Development Corp.] and Governor Carcieri’s office were full of obfuscation, camouflage, and possibly outright lies.’’ Watson said he opposed the program as “a scandal waiting to happen.’’

Not a business expert, by any means, but why does a video game startup have a ton of employees and a sole focus on boutique PC games instead of cheap mobile ones? At least he’s not Lenny Dykstra.

[Photo via Presswire]

Update: According to the Providence Journal, a second attempt to make the loan payment was successful. The company wired the state $1.025 million and paid an additional $100,000 via personal check.

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