Mattiello: 38 Studios Payment Took RI Off S&P CreditWatch List

“This affirmation from S&P shows that our decision was sound and will ensure protection of the state’s investments and reputation,” said Speaker Mattiello.

Photo: Rhode Island General Assembly
Photo: Rhode Island General Assembly
Speaker Nicholas A. Mattiello said he is pleased Standard & Poor’s rating agency has affirmed Rhode Island’s credit rating and removed the state from its CreditWatch list following the General Assembly’s decision to pay the $12.3 million installment of the job creation guaranty bonds for 38 Studios.

S&P bumped Rhode Island off the list – which implies there is little to no potential for an immediate downgrade of the state’s bond ratings – on Wednesday, just a few short days after lawmakers approved the Fiscal Year 2015 budget. Gov. Lincoln D. Chafee signed the budget into law yesterday in a ceremony in the State Room. 

“This affirmation from S&P shows that our decision was sound and will ensure protection of the state’s investments and reputation,” said Speaker Mattiello. “When Majority Leader John DeSimone and I met with the ratings agency last month, there was a clear indication from Moody’s and from S&P that refusal to make the bond payment would result in a ratings downgrade.”

The speaker also pointed out that many of Rhode Island’s investments and economic initiatives would have been severely jeopardized if the state received a downgrade from any of the rating agencies.

“At a cursory glance, a bond rating may not seem all that important,” Speaker Mattiello added. “But it is crucial as we look to improve our financial outlook. We can’t reverse our course and renege on an obligation that could jeopardize economic growth for decades to come. This message from S&P is good news for us. The state’s positive bond rating will assist us as we implement a comprehensive economic strategy to move our state forward in a positive direction.” 
Jack Baillargeron June 23, 2014 at 08:42 AM
Incorrect Anne; Problem is the Taxpayers are not the ones who borrowed the money. Studio 38 borrowed it. The taxpayers were not and are not liable for that. That's what grown-ups do know.
George Costanza June 23, 2014 at 11:22 AM
You guys don't understand this deal. The state didn't give anyone any money. Basically the state wrote a letter saying "if this company tanks, we promise to pay $75mil." The corruption comes from the allegations that General Assembly members sold the state insured bonds (without disclosing their relationship to the public) or purchased the bonds. The deal was brokered to benefit general assembly members personally. When you think of repaying the bonds, think of a portion of those payments going to Gordon Fox
Abe Lincoln June 23, 2014 at 12:14 PM
I am banking on Jesus Christ above to straighten out this mess! I am headed to the theatre!
Jack Baillargeron June 23, 2014 at 08:14 PM
Not exactly correct George in my opinion. Though they were "moral Bond" which means there was risk because the State was not liable to pay the investors back. Though once one payment was made that option went out the window obviously. Good article about this here. It was all done through the RIEDC. http://www.bna.com/rhode-island-economic-development/ The Rhode Island Economic Development Corporation (RIEDC) Nov. 1 filed a complaint against Wells Fargo Securities LLC, Barclays Capital PLC and former Major League Baseball pitcher Curt Schilling, among others, in Rhode Island Superior Court (Rhode Island Economic Development Corporation v. Wells Fargo Securities LLC, R.I. Super. Ct., docket number not available, complaint filed 11/1/12). The allegations in the complaint arise from the RIEDC's issuance of $75 million in bonds to Schilling's 38 Studios LLC, a video game development company, which filed for Chapter 7 protection June 7 in the U.S. Bankruptcy Court for the District of Delaware along with three affiliates (24 BBLR 822, 6/21/12). 38 Studios is not named as a defendant in the complaint. Issuance of Bonds The RIEDC is a “quasi-public corporation created … to promote certain economic policies of the State of Rhode Island,” according to court documents. The complaint alleges that defendants Wells Fargo and Barclays acted as “placement agents” in connection with the issuance of the bonds to 38 Studios. In 2012, the RIEDC issued the bonds to “finance a loan to enable 38 Studios LLC to relocate to Rhode Island, complete production of a massive multiplayer online video game called Copernicus, and to capitalize the company's growth and expansion in Rhode Island,” according to court documents. However, 38 Studios subsequently filed for bankruptcy in June 2012. Undisclosed Risks The RIEDC alleges that 38 Studios's failure was due to “risks that had not been disclosed to the [RIEDC] board, but were or should have been known by” 38 Studios and the defendants. The complaint alleges that the defendants knew that “even with the loan from the [RIEDC], 38 Studios was undercapitalized by many millions of dollars and would not have nearly enough money to relocate to Rhode Island and complete Copernicus, and that, as a result of this cash shortfall, 38 Studios was likely to run out of money in 2012.” The complaint also alleges that “Wells Fargo was earning nearly $500,000 in hidden commissions from 38 Studios at the same time that Wells Fargo owed fiduciary duties to the [RIEDC] Board to disclose all negative material information concerning 38 Studios' business plan and financial projections, including the shortfall.” The complaint alleges 17 counts against the defendants, including, among others, breach of fiduciary duty, fraud, negligence, legal malpractice, and breach of implied covenant of goof faith and fair dealing.
Jack Baillargeron June 23, 2014 at 08:15 PM
Sorry still waiting for the darn patch to put the paragraph feature back lol.


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