EDC holding onto pivotal $1.12M May payment from 38 StudiosJune 18th, 2012 at 5:00 am by Ted Nesi under Nesi's Notes, On the Main Site
38 Studios missed the $1.125 million payment to the EDC on May 1, technically putting it into default and making it ineligible for state tax credits. After trying to pay with a bad check May 17, 38 Studios made good the next day by cutting a check for $100,000 and wiring the rest of the money.
That money didn’t go to the investors who bought $75 million in taxpayer-backed bonds the EDC issued for 38 Studios, however; it was an “annual guaranty fee,” equal to 1.5% of the average amount of outstanding bonds, that 38 Studios owed the EDC itself under the terms of the 2010 loan deal.
EDC spokeswoman Judy Chong told WPRI.com the quasi-public agency split the $1.125 million into two pots. Under the 2010 law that created the $125 million Job Creation Guaranty Program, half the money was required to go into “a reserve fund from which shall be charged any and all expenses of the [EDC] with respect to guarantee or bond obligations of the [EDC] pursuant to these resolutions resulting from a program borrower’s default.”
Chong said the EDC is still weighing what to do with the other half of 38 Studios’ $1.125 million payment. ”The use of the other half has not been determined,” she said in email. “It could go toward payment of fees (such as legal fees).”
• Related: 38 Studios owed EDC money on May 1; did Schilling firm pay? (May 15)