Report warns of consequences of not paying back 38 Studios loan - ABC6 - Providence, RI and New Bedford, MA News, Weather

Report warns of consequences of not paying back 38 Studios loan

Posted: Updated:
By: Dee DeQuattro
Twitter: @deedeqiuattro 
Email: dddequattro@abc6.com

A47-page report released on Friday warns that not paying back the 38 Studios loan money could have a “swift and severe” impact on Rhode Island’s bond rating.

The report, released by SJ Advisors, an independent firm hired by Governor Chafee to assess the impact of not paying the 38 Studios loan money, warned that rating agencies may drop Rhode Island’s state bond rating to “junk” status if the state decides not to make good on its promise to pay back the money.

In 2010 the Rhode Island Economic Development Corporation gave a $75 million dollar loan guarantee to Former Red Sox Pitcher Curt Schilling to start up a video game company. The company, 38 Studios, went bankrupt in 2012 leaving the state on the hook for the money.

The report said by not making payments would lead to a series of cascading event that ultimately would lead to increased costs associated with Rhode Island’s debt. The report suggests that market access to capital would be reduced, existing general obligation bonds may be down graded and interest rates would rise, and rating downgrades could cause at least one existing bond to default. See the full report here.

Rhode Island lawmakers have debated the issue several times. Last year lawmakers decided to allocate money towards repaying the loans.

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