Earlier this week it came to light that CIG has taken out a second Star Citizen loan, this time from the bank Coutts. The loan appeared on their UK tax filings at Companies House dated 15 June. CIG co-founder and legal counsel Ortwin Freyermuth explained in a forum post
that these loans are more of an expected reaction due to the chaotic and uncertain future of GBP and the UK economy due to Brexit. The intent here is to secure the remaining funding for development against market irregularity that could weaken the value of the currency and assets held by CIG et al.
We have noticed the speculations created by a posting on the website of UK’s Company House with respect to Coutt’s security for our UK Tax Rebate advance, and we would like to provide you with the following insight to help prevent some of the misinformation we have seen.
Our UK companies are entitled to a Government Game tax credit rebate which we earn every month on the Squadron 42 development. These rebates are payable by the UK Government in the fall of the next following year when we file our tax returns. Foundry 42 and its parent company Cloud Imperium Games UK Ltd. have elected to partner with Coutts, a highly regarded, very selective, and specialized UK banking institution, to obtain a regular advance against this rebate, which will allow us to avoid converting unnecessarily other currencies into GBP. We obviously incur a significant part of our expenditures in GBP while our collections are mostly in USD and EUR. Given today’s low interest rates versus the ongoing and uncertain currency fluctuations, this is simply a smart money management move, which we implemented upon recommendation of our financial advisors.
The collateral granted in connection with this discounting loan is absolutely standard and pertains to our UK operation only, which develops Squadron 42. As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes “Star Citizen.” The UK Government rebate entitlement, which is audited and certified by our outside auditors on a quarterly basis, is the prime collateral. Per standard procedure in banking, our UK companies of course stand behind the loan and guarantee repayment which, however, given the reliability of the discounted asset (a UK Government payment) is a formality and nothing else. This security does not affect our UK companies’ ownership and control of their assets. Obviously, the UK Government will not default on its rebate obligations which will be used for repayment, and even then the UK companies have ample assets to repay the loan, even in such an eventuality which is of course unthinkable.
This should clarify the matter. Thank you.
The explanation does seem to have sated some critics, but some people seem a bit more hesitant to side with CIG, if the reaction on sites like NeoGAF is anything to go by. And frankly, the fact that the backers stand to lose big should the development of Star Citizen go bust, makes it easy to understand the cynicism. It is worth noting though that the terms of the loan have been explicitly spelled out as NOT including Star Citizen IP as collateral.
With more than $150 million in crowdfunding for the game already secured, it feels justified to be a bit suspicious of whether the game is quickly turning into an endless money suck. But even if those suspicions are baseless, that would do little to assuage the whirlwind of skepticism surrounding Star Citizen, even with the 3.0 Alpha heading for release at the end of June, some people will continue to be dissatisfied with the progress of the game.