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.