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38 Studios files for Chapter 7; owes creditors at least $100 million

June 7 (Bloomberg) -- The video-game company founded by former Boston Red Sox pitcher Curt Schilling filed for bankruptcy after firing employees in Rhode Island, where it operated with help from $75 million in government bonds.

38 Studios LLC filed for liquidation today under Chapter 7 of the bankruptcy code, saying it owes creditors at least $100 million. Its assets total $10 million to $50 million, according to the filing in U.S. Bankruptcy Court in Wilmington, Delaware. Under Chapter 7, a court-appointed trustee liquidates the assets and distributes the proceeds to creditors.

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Last year, Schilling moved 38 Studios from Massachusetts to Rhode Island after securing cash from the bonds through the state’s economic-development agency. The company received about $49.5 million, according to a fact sheet provided by the Rhode Island Economic Development Corp.

38 Studios, based in Providence, spent the $49 million it received from the bonds, said Rosemary Booth Gallogly, the state director of revenue. The remaining proceeds are in debt-service reserve accounts, she said.

To help repay the bonds, 38 Studios pledged its video-game assets, patents, software and other property as collateral.

Fantasy Writer

The company had hired best-selling fantasy writer R.A. Salvatore and graphic novelist Todd McFarlane to help design games. It released one role-playing game, Kingdoms of Amalur, through Electronic Arts Inc. and was working on another product, called Copernicus.

The company made a $1.1 million payment to bondholders on May 18, 17 days after it was due. The next payment of $2.6 million is due Nov. 1.

Schilling, 45, won three World Series championships during a 23-year career. His bloodstained sock from the 2004 postseason became a part of Boston history after he helped the Red Sox end an 86-year title drought.

A six-time All-Star, he retired in 2009 after missing the previous season following surgery on his pitching shoulder. He ended his career with a 216-146 record, a 3.46 earned run average and 3,116 strikeouts, the 15th-most in Major League Baseball history.

The case is In re 38 Studios LLC, 12-11743, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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