The bankruptcy process is rarely smooth and easy, but former Red Sox pitcher Curt Schilling is really learning that lesson this week. Schilling’s video game company, 38 Studios, is currently filing for bankruptcy in Rhode Island. However, the debts are having a significant impact on the state, and could affect taxpayers.
Schilling’s Debt Hitting Home
Oftentimes, when a company is filing for bankruptcy, it’s private lenders and banks that get hit hard by the unpaid loans. In the case of 38 Studios, the state of Rhode Island is taking a significant hit. In 2010, Schilling was drawn to Rhode Island from Baltimore, Maryland by the state’s attractive loan guarantee of $75 million.
Rhode Island assumed that 38 Studios would bring in hundreds of jobs and several million dollars worth of tax revenue in the short term alone, prompting the economic development agency to offer the loan. Unfortunately for all parties, things have not gone according to plan.
38 Studios is in the hole, and they’re in deep. The company owes more than $150 million to creditors. Their assets, however, are only one seventh of that amount: $21.7 million. Nearly $116 million worth of that debt is owed to the state of Rhode Island.
Employees Suffering As Well
The bankruptcy process isn’t just hurting the company and the state, but employees are taking a hard hit. When the company moved from Baltimore to Providence, many employees followed, buying homes in Providence, and paying two mortgages (one in Baltimore, one in Providence). Now facing unemployment and two mortgage payments, 38 Studios employees are between a rock and a hard place, to say the least.
38 Studios is responsible to a contracted moving company, MoveTrek, for mortgage payments on many of these employees’ homes. It will be interesting to see how the bankruptcy proceedings play out over the next few weeks between 38 Studios, the state of Rhode Island, and the affected employees.