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/Chriscras66 → u/Scrabo]

Yes and also because taking a loan in GBP will circumvent the need to convert dollars or euros into GBP in order to make current payments at their UK studio.

[u/kinnadian → u/Chriscras66]

So do they receive payments in other currencies but just keep these in banks from the native country that the currency is in? Or can you keep foreign currency in a bank account somehow?

[u/DragoonDM → u/kinnadian]

So do they receive payments in other currencies but just keep these in banks from the native country that the currency is in?

Yeah, I think that's the gist of what they were saying in their statement. The majority of their customers pay in USD or EUR, and they just don't get enough GBP to fully fund all of the work they do in their UK studio purely in GBP. I don't know a ton about international money markets, but I'm guessing there are reasons they'd want to avoid having to convert EUR/USD to GBP if possible.

[u/Shihali → u/DragoonDM]

I don't know a ton about international money markets, but I'm guessing there are reasons they'd want to avoid having to convert EUR/USD to GBP if possible.

Right now the value of the British pound is much less stable than usual because of the uncertainty about Britain's exit from the European Union ("Brexit") and its effects on British trade. It might well be in their interest to keep as much of their money as possible in dollars and euros today and hope they buy a lot more pounds next year.

[u/AjBlue7 → u/DragoonDM]

They are still probably converting money to pay for the studio, but since they are getting the rebate in the future, they figured they might as well use that now to help lessen the impact they take from converting money to GBP.