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economic development

Schilling’s 38 Studios bond closes, governor-elect disappointed

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PROVIDENCE – The R.I. Economic Development Corporation announced Wednesday that it had sold $75 million in bonds to help finance the expansion of 38 Studios LLC and its relocation to Providence from Massachusetts and Maryland.

The EDC says the move by the gaming company founded by former Red Sox pitcher Curt Schilling will create 450 jobs and spark the creation of a video-gaming industry in the state.

The announcement of the bond sale, one day after the election, immediately drew fire from Governor-elect Lincoln Chafee, who staunchly opposed the deal as a candidate.

“We’re very disappointed that the deal has closed,” Mike Trainor, a Chafee aide and former campaign manager, said on Wednesday. “His position all along was that this was a bad deal for the Rhode Island taxpayer. He consistently asked the EDC and the current administration to delay closing the deal until the next governor was inaugurated.”

Trainor said Chafee planned to review the deal but stopped short of saying if the governor-elect would specifically explore ways to reverse the closing.

“Our focus right now is to protect the Rhode Island taxpayer and beyond that we’re not going to speculate on what actions we may or may not take,” Trainor said.

The EDC said that Wells Fargo Securities Capital and Barclays co-underwrote the bonds, which were purchased in a private placement Tuesday by a group of investors that included insurance companies, asset managers, money managers and a community bank. The bonds were sold at three maturities, with rates of 6 percent for 2015, 6.75 percent for 2016 and 7.75 percent for 2020.

The EDC said 38 Studios would immediately receive $13 million, with the rest of the money coming during the next 15 months as the company reaches certain milestones such as employment targets. The EDC will also set aside $20 million to cover debt payments during the first three years if 38 Studios defaults.

The gaming company, which has yet to release a product, will receive the money from the state’s $125 million Rhode Island Loan Guaranty Fund. The company announced in September it planned to move into offices at One Empire Plaza, a building once owned and occupied by Blue Cross & Blue Shield of Rhode Island.

Curt Schilling, Lincoln Chafee, Mike Trainor, 38 Studios, R.I. Economic Development Corporation, video gaming, state bond guarantee, revenue bonds, wells fargo, barclays

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richard@langseth.com

The Providence Journal reported yesterday that EDC's General Counsel Rob "Stolzman downplayed (a negative auditors) report’s significance as it did not reflect profits at a 38 Studios’ subsidiary, Big Huge Games. Big Huge Games of Timonium, Md., does not disclose revenues."

Stoltzman's statement is outrageous. Has anybody asked the Big Huge Games employees if they have any interest in leaving the game centric Baltimore area for Providence?

The fact is that Schilling bailed out Big Huge Games after its chief architect Brian Williams formed Zynga East.

We were all under the impression that Studio 38 was in Maynard Mass, within driving distance from Providence and that key employees would commute here.

Wrong - it turns out that Studio 38 is actually in Baltimore. Its founder has bolted to the biggest gaming house in the world - Zynga. Blogs show that Brian Reynolds started his Zynga East office with 12 to 15 employees.

The risks associated with attempting to move Big Huge Games from Baltimore to Providence should be obvious to anybody who has any experience with software development. The question is how many talented employees will move here?

How much will this move upset any works in progress at Big Huge Games? We are being told that this operation is years away from developing its product. Yup, that sounds right. No surprise there.

There is one other very disturbing aspect to all of this. EDC seems to be in love with Baltimore. A developer from Baltimore bolted from his EDC deals leaving projects half done here in Rhode Island including the EDC office park itself.

Then a "consultant" from Baltimore is offered the EDC Executive Directorship at an outrageous salary.

Having fought her off, we now find out that EDC is moving a Baltimore software house to the old Blue Cross building under the cover that it is a Massachusetts company while refusing to discuss the financial problems that that company is having.

EDC needs to come clean with the Big Huge Games story.

Richard Langseth

Saturday, November 6, 2010 | Report this
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