If 38 Studios does shutter, beyond Rhode Island taxpayers having to pay off the $75 million bond (plus interest) through 2020
, it appears the state will also own the intellectual property of the developer as a parting gift. Reviewing updated documentation released by the Rhode Island Economic Development Corporation (RIEDC) today, it appears 38 Studios put up all present and future IP by the company as collateral.
According to the documentation, 38 Studios
' intellectual property rights and other collateral were pledged to the RIEDC and assigned to a trustee, which we've confirmed by pulling Uniform Commercial Code documentation. Any proceeds made from the sale of the collateral would go back to the bondholders. This covers "all rights, title and interest in any projects, including video game projects," such as Kingdoms of Amalur: Reckoning
and "Project Copernicus
" – the title currently in development at 38 Studios.
"Based on what information I've been able to review on the 38 Studios situation, it appears that the funds they received from the RIEDC were secured by collateral that amounts to all of 38 Studios assets, including all of their intellectual property," attorney and Law of the Game
editor Mark Methenitis told Joystiq this afternoon. "That would include all the rights to Kingdoms of Amalur and any other games they may have in development, even if no information about those titles has ever reached the light of day."
"What that means, in brief, is if they default on their obligations to the RIEDC, then the RIEDC can turn around and take possession of as much of that as is necessary to pay off the debts owed. It's kind of like buying a house or a car and then failing to make payments; the lienholder – usually the lending institution – can repossess that house or car and resell it to offset their losses from your failure to pay."
Methenitis continued, "So, the RIEDC could then sell the rights in all of the Kingdoms of Amalur to another developer to offset the millions owed by 38 Studios, and this sale would typically be an auction-style sale to the highest bidder. As a secondary issue, if the sale of all those assets repossessed ends up being more than is owed, the RIEDC will theoretically owe those funds back to 38 Studios."
The Kingdoms of Amalur IP alone is unlikely to sell for $100 million.
"Practically speaking, assets sold after a repossession are usually a fire sale situation
and rarely break even from the amount owed," Methenitis said.