May 25 (Bloomberg) -- Former Boston Red Sox pitching star Curt Schilling’s 38 Studios LLC game-making company is “disintegrating” despite state efforts to save it, Rhode Island Governor Lincoln Chafee said.
“We are doing our best to salvage this, but the situation is very dire,” Chafee said today in a Bloomberg Television interview. The company dismissed workers yesterday, according to Nicole Romeo, a Labor and Training Department spokeswoman.
Schilling, 45, moved the company to Providence from Maynard, Massachusetts, with the promise to create hundreds of jobs after Rhode Island provided $75 million from an economic development fund, using bonds sold in 2010. The state unemployment rate has been more than 10 percent for three years, rising to 11.2 percent last month. Concerns about 38 Studios arose when the company missed a May 1 debt-service payment, covering it later.
“It has been difficult getting answers from them,” Chafee, an independent, said of the game maker today at a Statehouse news briefing. He said it was unclear how much Schilling had put in from his own pocket and that an audit would examine the company’s finances, including its use of the borrowed funds.
‘Tens of Millions’
“The taxpayers have tens of millions of dollars invested in this company,” Chafee said. “We want to know what happened to every penny of it.”
State and company officials are “brainstorming on investors that might be out there,” the governor said. “We’re not optimistic but we’re still working on it.”
Chafee, who took office in January 2011, inherited the deal with Schilling’s company from former Governor Donald Carcieri, a Republican.
“It was really insanity on the part of the previous administration to get into this high-risk industry, and now we’re seeing the ramifications,” Chafee said on Bloomberg TV’s “Street Smart” show. “Now we’re seeing this company disintegrate on us,” he said, calling it “a debacle.”
The state may be on the hook to repay bondholders who own the debt, issued by the Rhode Island Economic Development Corp.
No one from the company has responded to telephone calls today and yesterday seeking comment on the dismissals. 38 Studios released its first game, “Kingdoms of Amalur: Reckoning,” in February. Chafee said sales fell short.
Game Struck Out
“The game failed,” the governor said yesterday at a news briefing. “That was integral to the success of the company.”
As many as 300 people may be unemployed because of the failure, Chafee said.
The bonds maturing in November 2015 traded at an average yield of about 4.8 percent May 23, up from 3 percent April 10, according to data compiled by Bloomberg.
“The financial struggles of 38 Studios, a video-gaming venture, underscore the risks pertaining to economic development project financing by state and local governments,” Marcia Van Wagner, a Moody’s Investors Service senior analyst, said yesterday in a statement. She said the debt used to back the company isn’t at risk, citing state commitments to cover repayment.
Wearing number 38 on his jersey with the Red Sox in 2004, Schilling helped the team win its first World Series title in 86 years. He also played for Major League Baseball’s Arizona Diamondbacks, Philadelphia Phillies, Houston Astros and Baltimore Orioles.