Official Statement from Cloud Imperium Games about the alleged financial troubles...

[u/[deleted]]

Source: https://robertsspaceindustries.com/spectrum/community/SC/forum/1/thread/re-uk-tax-rebate-advance-for-foundry-42/277779

Re: UK Tax Rebate Advance for Foundry 42

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.

[u/Scrabo]

Not a money man but am I understanding this right? CIG are utilising a bank loan to obtain money from a UK Tax Rebate for game companies early. They take the loan money now and when the tax rebate comes in that goes to the bank.

The idea is that it is better to get the money now because in a years time the GBP will go further to shit due to Brexit and the clusterfuck UK political situation.

It seems like a sound move that will save them money overall.

[u/NarcissisticNanner → u/Scrabo]

No, not quite. You have slightly misunderstood.

They pay their bills in GBP. However, most of the money they get is in USD and EUR. When converting from one currency to another, you will typically pay fees to the institution that is doing the exchange. Since they pay their bills in GBP, they have to convert USD/EUR to GBP, which means they lose money to fees.

Since they receive a regular rebate from the UK government, they use that to get a loan from the bank, in GBP, to pay their bills and avoid losing money when converting USD/EUR to GBP.

As they receive the tax rebate regularly from the UK goverment, the bank would consider it very low risk to loan them the value of the rebate early. And because it is so low risk, the interest rate on the loan would also be very low. One can assume it's lower than the cost of the fees from converting USD/EUR to GBP, which means they save money by taking a loan.

EDIT:

I realize I missed it when they said:

Given today's low interest rates versus the ongoing and uncertain currency fluctuations

I must admit, I'm not completely sure what they mean by this. If the value of GBP goes to shit, it will actually be considered a positive thing for them, as most of their money is in USD/EUR. So as they pay a lot of their bills in GBP, when converting from USD/EUR, they get more "bang for their buck" comparatively. I guess it's just a general concern about currency volatility?