September 5th, 2017

CIG’s explain why they’ve taken out a second Star Citizen loan

CIG’s explain why they’ve taken out a second Star Citizen loan

Yesterday 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.

The appearance of this loan became a concern to some backers wondering why Star Citizen, which had raised over $150 million in crowdfunding, was taking out multiple loans. The main cause for concern was this loan’s terms where if CIG failed to cough up payments, Coutts would gain the rights to Star Citizen and the IP but that appears to be an excluded collateral point in the document.

No explanation as to why the loan had been taken was posted at the time but it has been explained today. Concerned about misinformation spreading about the stability and liquidity of CIG, company director Ortwin Freymouth explained why they sought the loan.

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.

This explanation makes sense in some respects due to the uncertainty surrounding the value of the Pound thanks to Brexit, the less cash you have to convert and move around the better. With companies having no idea what is going to happen with Brexit and the value of GPB in twelve months, it’s best to play it safe.

As nobody really knows the finances surrounding Star Citizen, backers have to assume the company is in good shape based on what is filed at Companies House for the UK side of the business. However, the terms of the loan appear to be quite heavy and encompassing should anything go wrong (see point 5 of the doc), and it still could. The good news is the tax credits will come so there should be nothing to worry about as far as the loan is concerned if money keeps coming in to fund operations.

The good news is the tax credits will come so there should be nothing to worry about as far as the loan is concerned if money keeps coming in to fund operations.

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  • Paul Younger

    Founder and Editor of PC Invasion. Veteran PC gamer of over 22 years.

    • mauzao9

      This is utterly ridiculous, the doomsday apocalypse was being painted in the media over something that turns out wasn’t anything, just CIG doing what Ubisoft also does to save money with studios spread over the world. The journalists that reported this originally even failed to read the contract correctly.

      TLDR :
      – CIG deems GBP-EUR & GBP-USD currency conversion fluctuation to be more costly than that bank’s interest rates. That’s why they pursued this. It’s an honest business decision.

      • Brian Rewis

        That is because once a year, often before Gamescon, Derek Smart and his fail troll army like to start shit like this. I sincerely believe when the game launches and is a success, he is going to be so shamed that he either changes his name or drinks a cup full of bleach. The guy is obsessed with bringing SC down after they banned his account for promoting his own shitty game in the SC forums

        • Dragon75

          Unfortunately I doubt that happens.
          I think its far more likely that he will claim that the sole reason it did come out at all is because of him putting pressure on them.

        • MosesZD

          Not Derek Smart. This guy trolled the Internet from the time of it’s public inception back in the ’90s and hasn’t sopped.

      • Joe_Blober

        I aslo said to doomsayers yesterday that even Apple and IBM are going to bank for loan… At the end the all strory will make more advertising for CIG…. Too bad that SC 3.0 is not yet here otherwise Drama + a SC 3.0 release a couple days after would have been Gold 🙂

    • Dragon75

      **The main cause for concern was this loan’s terms where if CIG failed to cough up payments, Coutts would gain the rights to Star Citizen and the IP.**

      This sentence here is completely false.
      In the very text you quoted in your article here it says the exact opposite.

      **As a careful review of the security will show and contrary to some irresponsible and misleading reports, the collateral specifically excludes “Star Citizen.” **
      Note that it clearly says that it specifically EXCLUDES Star Citizen.

      And just because they take up a loan does not automatically mean they are in financial trouble, most companies around the world does the very same thing.

      • Paul Younger

        That’s not how the filed document reads.

        Yes, it does not mean they are in financial trouble. I mean it would be be ridiculous if they were.

        • Dragon75

          You have a link to that filed document?
          I would like to see whats in that document for myself if its possible, as I find it hard to believe they would go out and refute that claim if it was true

          As for the financial aspect, my reason for that past of my comment was to provide a little bit of common sense in the face of all the people claiming they are in financial trouble just because they take up a loan.

          • Paul Younger
            • Dragon75

              Have you actually read that document yourself, or did you just skim over the first few pages?

              Having gone through that entire document twice I have found that the Star Citizen IP is specifically excluded(page 17-18) as collateral.

              Even so if one takes a little time to actually read and understand what is written, it becomes clear that its not the SC IP thats put up for collateral.
              The loan is made out to Foundry 42, not Cloud Imperium Games, so it stands to reason that its the SQ42 IP thats put up for collateral and not SC since SC is not dveloped at Foundry 42, only SQ42.
              Despite appearances and their interconnectivity, SQ42 and SC are in fact two separate games.
              And while Foundry 42 is a subsidiary of CIG(at least I think it is so correct me if I’m wrong), it is a company in its own right and can take up loans and put up assets they own as collateral without it affecting the main company and its assets which would be separate from that again.

              I know its likely difficult to understand for most people and most people(including the writer here it seems) cant be bothered with anything more than a cursory glance which usually leads to people misreading and misunderstanding or missing important information.
              Thats why its important, especially for people who work in the media(like the writers here), to take the time to read and fully understand what is being said.

              • Paul Younger

                Yes, that’s in the piece.

              • MosesZD

                I’ve read the document. It’s specifically excluded.

        • mauzao9

          Yes it reads like that, the term that excludes Star Citizen is there, this was specific to the UK Operation, people with no legal insight easily misunderstand the document, and so it happened with the journalists that reported it incorrectly.

    • Johannes du Preez

      What an arrogant, false and misleading piece of shit post, specifically to “blame” CIGs fantastic financial situation on BREXIT ! BREXIT is only beneficial to this. What a shitty second-tier piece of garbage article, you should be ashamed of yourself and seriously quit your job man!

      Cloud Imperium Games took out this “loan” and secured it against only the single-player campaign Squadron 42 specifically because CIG would then save money because of the low interest rates when you factor in that in the UK they would otherwise of waited 12 months before they could reclaim some tax credits in the form of Game credits.

      • Brian Rewis

        I like how you say all of this as if you had any actual idea of what you are talking about. If you are not with CIG or the bank that offered the loan then you are simply blowing smoke out of your ass.

      • Paul Younger

        Due to Brexit and the weak currency, it’s best not to move money around if you don’t need to. You just never know what GBP is going to do With tax credit being a year away, nobody knows what will happen between now and then so taking the loan makes sense, and the interest rates etc.

        As for your post. I have to assume you are in favour of Brexit which is so far an unknown. Negotiations are not exactly going to plan thanks to the strong and stable leadership in the UK.

    • Joe_Blober

      Good job Paul younger!

      For following several news site around, Paul is doing a good job at keeping news as clean as possible.

      In that case, while some unknown sites where shooting crap already hours after one started to share information rather than ask first Cloud Imperium THEN share whatever they want, Paul did use a pretty clear title, 24 hours after CIG provided information:

      “CIG’s explain why they’ve taken out a second Star Citizen loan’”

      Among one of the first few site yesterday shooting crap is now providing apologise:

      Press-Start: “We’d like to apologise to Cloud Imperium Games for not clarifying with them on the specifics of this prior to posting.” self.starcitizen.
      They removed the first article at once 🙂

      24 hours of drama is always good for internet… but not for the planet.

    • MoreDelays

      So, they took out a collateral loan to dodge currency fluctuactions ……. I don´t think so juas juas

      The good news is backers don´t know the finances surrounding Star Citizen, so they can do damage control for a while.

      #OpenDevelopment

      • Joe_Blober

        … And now MoreDelays… close follower of the indie guy behind that crap is still poping out his head just to add some more garbage… 🙂
        That and prophecies of Doom… keep going man…. this “loan disaster” parody have solidified the Community and provided even more advertising, just in time for the upcoming SC 3.0 patch. Thanks! 🙂

    • Adept

      We’ll see. The game is still AWOL, and CIG haven’t really shown they can deliver on anything they promised.

    • MosesZD

      Jesus, no. It’s just a relatively small loan that is secured like every other ****ing commercial loan. That’s all.

      That you people feel it necessary to talk about things you don’t understand and speculate is just silly beyond belief. This was the infamous troll Derek Smart saying stupid stuff and picked up by the fools at NeoGAF.

    • Daves!

      Like Scarface from the movie would say : “So…. you got the Stuff? “

    • Phoni Faux

      Why did they NEED to take the loan in such a well funded project in the first place? Roberts said not long ago that they had plenty of capital to complete the project. Not they felt compelled to take a loan, even if the rates are favorable it costs money. I know that there are people who would say that you are not educated in the way to structure businesses and loans. Possibly true.

      Obviously Ortwin and Roberts find themselves in a situation where they structured the corporations incorrectly and they felt compelled to take loans. Another expensive failure to plane adequately for the businesses future at best or CIG is failing financially at the worst. All this comes on the heels of the story on how Roberts was pleading for continued strong financial support. According to him not because they are broke but because it speeds things along.

      Well here we are we were expecting 3..0 to be released, he has a huge staff across several continents and it has again been delayed for the umpteenth time. Then it was delayed again, and again, and still again. Surprise! I guess the financial support from backers was not for the purpose of speeding things along after all. Were we speeding things along since last summer? This is all coming too fast! Light speed patches! Except for the screw ups of 2.6 and 2.7 they have not done anything in a long while but collect money. And make promises and revise schedules, and create video content for You Tubers to spread as false advertisements of supposed progress in in game game play.

      The stories and excuses have worn thin, credibility is at an all time low. Mr Roberts I suggest you shit or get off the pot.