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RIEDC Board Authorizes First Use of New Jobs Creation Program

July 27, 2010 | Print this page | Share This |

RIEDC Board approves measure paving way for video game developer 38 Studios to move to R.I. and bring 450 highly skilled, high-wage jobs to the state

In the first use of a new $125-million program to create jobs in the Ocean State, the Rhode Island Economic Development Corporation (RIEDC) Board of Directors today approved a Final Authorizing Resolution to provide video game developer 38 Studios a loan guarantee to help the company expand its business and relocate to Rhode Island.

The $75 million guarantee will assist the Maynard, Mass.-based company in obtaining private financing to bring 450 highly skilled, high-wage jobs to the state. The remaining $50 million will be available for other innovation-driven small businesses to help them gain access to private growth capital and credit.

“I commend the RIEDC Board for its extensive due diligence and for taking this significant step to bring jobs to Rhode Island. This investment in our economic development has the potential to spark the expansion of a new industry in our state and generate additional new business growth. I welcome 38 Studios and am confident Rhode Island will provide the environment and workforce to make the company a leader in the interactive entertainment and video game industry,” said Governor Donald L. Carcieri. “Other companies in growth industries, like software design and engineering, advanced manufacturing, life sciences and defense, among others, should see this as a clear sign that Rhode Island is here to support their business and invest in their future success.”

Key provisions of the agreement include the following:

•38 Studios is required to relocate to Rhode Island.

•38 Studios will not receive the entire loan amount at once. The company will receive the funds on a staggered basis as it meets certain relocation, job creation and product development goals.

•Closing of the loan requires a signed enforceable lease for the company’s corporate offices and studio operations in a location in Rhode Island that is satisfactory to both the RIEDC and 38 Studios.

•38 Studios will offer its assets as collateral to the state. These assets include, intellectual property, licenses, licensing fees, distribution and publishing contracts, receivables, equipment, hardware, software and work product.

•The company will pay annual fees to the state based on a percentage of the outstanding loan.

•38 Studios is subject to a job shortfall penalty fee of $7,500 per year for each of the 450 jobs it has agreed to bring to Rhode Island.

• The RIEDC must approve the private lender that will be making the loan to 38 Studios.

•The loan cannot be transferred without RIEDC consent.

•Should 38 Studios relocate the company or any substantial portion of its operations outside of Rhode Island, it would constitute as a default on the loan in which case the company’s debt and related job shortfall penalty fees would become immediately payable, including any outstanding costs and expenses incurred by the RIEDC.

•A third party monitoring, reporting and response process regarding the company’s progress will be developed and implemented. 38 Studios will provide annual certifications that the company has met certain requirements of the agreement. The RIEDC may at the cost and expense of the company have such certification audited by independent public accountants.

“We’d like to thank Governor Carcieri, Speaker Fox, President Paiva-Weed, Chairman Costantino, Chairman DaPonte and all the members of the General Assembly, the EDC Board, and EDC staff, especially Executive Director Stokes and Deputy Director Saul, for their support and confidence in our company’s growth. Today is a major step in moving us toward our goal of relocating our headquarters to Rhode Island. In doing so, we will support an interactive entertainment industry cluster that will bring thousands of high-paying, permanent jobs to Rhode Island. 38 Studios already has a number of Rhode Islanders and graduates from many of the local educational institutions on our team, and we look forward to recruiting more talented Ocean State residents to build the kind of careers that will be integral to our continued growth and provide the needed opportunities to keep local talent in state,” said Jennifer MacLean, President and CEO, 38 Studios.

“38 Studios will hopefully be the first of many creative companies relocating to Rhode Island as a result of the loan guarantee program that the General Assembly proudly enacted in cooperation with the Governor and the EDC,” said House Speaker Gordon D. Fox. “The plan approved today fits perfectly with the Assembly’s emphasis on attracting knowledge-based technology companies that offer high-paying jobs that are so sorely needed.”

President of the Senate M. Teresa Paiva Weed said, “One of the ways in which the Senate has been working to make it easy to do business in Rhode Island is by ensuring that businesses have access to the capital they need to create jobs in a tight credit market. The legislation that made today’s action by the EDC possible is already having its intended effect, allowing a company to create hundreds of jobs. This is great news for Rhode Island.”

Legislation enacted in June established the Job Creation Guaranty Program. The program authorizes the state to support critical economic development projects by backing private loans for innovative companies with primarily “soft” assets - like patents, intellectual properties and licenses - to help them expand and create a significant number of permanent, high paying jobs in Rhode Island.

“Our new Board was asked to provide leadership in helping Rhode Island build a healthier and more sustainable economy, in part by attracting new businesses to Rhode Island as well as supporting the growth of existing businesses. The Job Creation Guaranty Program gave us an important tool to encourage growing and innovative companies like 38 Studios to create jobs in our state. These are precisely the kinds of businesses we need to attract,” said Al Verrecchia, RIEDC Board member and Chairman of the Board of Hasbro. “No question, there are risks associated with this opportunity, as there are with any other business transaction, but the Board has negotiated substantive provisions that protect Rhode Island’s interests and encourage the growth of 38 Studios.”

“38 Studios is the first of likely many companies that will use the Job Creation Guaranty Program. The RIEDC is moving the economic needle forward, and we are ready to work with other innovation-driven businesses to bring highly skilled, high-wage jobs to Rhode Island,” said RIEDC Executive Director Keith Stokes. “This program was designed to create Rhode Island jobs, generate entrepreneurial activity, accelerate growth in existing small businesses and help attract new businesses to Rhode Island. The Board’s approval of 38 Studios accomplishes all of these objectives.”

The Job Creation Guaranty Program is comparable and a compliment to the Rhode Island Industrial Recreational Building Authority (IRBA) program established in 1958 to supply lenders with credit enhancements for long-term financing for companies with “hard” assets like buildings and machinery.

The addition of 38 Studios to Rhode Island’s growing knowledge economy is a critical step in further developing the state’s digital media sector.

Companies like 38 Studios will help establish the state as a center of a multi-billion dollar video game industry. Building on the creative and technical talent available at Rhode Island colleges and universities, 38 Studios will be the catalyst for hundreds of additional industry-related jobs in the state. A vibrant digital media sector will keep more Rhode Island graduates in the state and boost overall average incomes.

38 Studios also has natural alignments with major local companies already involved with digital media. Pawtucket-based toy maker Hasbro recently entered into a joint venture to create a multimedia family entertainment platform. Providence-based GTECH is a leading global gaming technology and services company.

“I am excited that 38 Studios’ presence in Rhode Island will create a new business sector opportunity for the state,” said Dan Baudouin, Executive Director of The Providence Foundation. “38 Studios will help Rhode Island create a cluster of knowledge and competencies to compete globally in the growing digital media market and to create more high-wage jobs.”

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