PROVIDENCE – The R.I. Economic Development Corporation says bond rating agencies Standard & Poor’s and Moody’s Investor Service issued favorable ratings on the bonds for the state’s loan guarantee with Curt Schilling’s video game company, 38 Studios.
Standard & Poor’s issued an A rating, two notches below its top rating of AAA, and Moody’s rated the moral obligation bond at A2, which is five slots lower than its highest mark. Moody’s characterizes that rating as “upper-medium grade” but says bonds with such ratings “suggest a susceptibility to impairment of the long term.”
The ratings are critical to the deal because, generally, the higher the bond ratings, the lower the interest rates need to be to attract investors. EDC said the rates on the 38 Studios bonds are expected to be lower than the cap set by its board of directors.
EDC Keith Stokes and Gov. Donald L. Carcieri were pleased with the agencies’ grades.
“In our view, these ratings will reflect positively on this investment,” Stokes said in a statement. “The favorable evaluation confirms the EDC board’s assessment in approving this opportunity.”
“The positive ratings by Standard & Poor and Moody’s are a strong indication that the market recognizes the growth potential of 38 Studios and the strength of the interactive gaming and digital media industries,” Carcieri said.
The EDC said Standard & Poor’s and Moody’s will publish their full rating reports in the next few days.
The agencies issued the rating despite efforts by General Treasurer Frank T. Caprio, a gubernatorial candidate, to get them to hold off until a new administration is in office in January. Caprio also voiced his concerns about what he said was a risky loan guarantee to a bond industry publication.
The ratings were publicized just hours after 38 Studios announced that it had signed a lease to move into One Empire Plaza in downtown Providence, an office building that was once occupied by Blue Cross & Blue Shield of Rhode Island.
And why not??? The Rhode Island tax payer is guaranteeing the bonds. And then there is all that water front property that the state can seize and that a court appointed trustee can sell when we go bankrupt.