Chafee issues statement on 38 Studios deal; says he will monitor the EDC

LINCOLN CHAFEE ISSUED A STATEMENT late Wednesday expressing his disappointment over the R.I. EDC's closing of a bond for 38 Studios.
Posted 11/4/10

PROVIDENCE – Lincoln Chafee, Rhode Island governor-elect, issued a statement late Wednesday expressing his disappointment over the closing of R.I. Economic Development Corporation's $75 million bond deal for Curt Schilling’s 38 Studios LLC.

“I would have preferred that the EDC honor my request to defer the closing so that I would have had a chance to formally contribute to the process,” Chafee said. “Now that it has closed, I will do everything in my power to protect the interests of the taxpayers of our state.”

“I will continue to carefully monitor further steps taken by the EDC. It is my intent to ensure that the state fulfills any and all of the commitments made by the EDC. I will, however, ensure that 38 Studios fully and completely comply with each and every commitment that it has made to the taxpayers of Rhode Island,” he said.

“Too often in the past we have failed to monitor economic development deals to ensure that commitments be kept," said Chafee, adding: "That will not be the case here. We wish 38 Studios the greatest success, while vigilantly protecting taxpayer interests.”

The EDC says the move by the gaming company will create 450 jobs and spark the creation of a video-gaming industry in the state.

The bond sale was announced early Wednesday and Chafee issued his formal statement later that afternoon.

A Chafee aide told Providence Business News soon after the announcement was made that the governor-elect was “very disappointed.”

“[Chafee’s] position all along was that this was a bad deal for the Rhode Island taxpayer. He consistently asked the EDC and the current administration to delay closing the deal until the next governor was inaugurated,” said Mike Trainor, a Chafee aide and former campaign manager.

The EDC said that Wells Fargo Securities Capital and Barclays co-underwrote the bonds, which were purchased in a private placement Tuesday by a group of investors that included insurance companies, asset managers, money managers and a community bank. The bonds were sold at three maturities, with rates of 6 percent for 2015, 6.75 percent for 2016 and 7.75 percent for 2020.

The EDC said 38 Studios would immediately receive $13 million, with the rest of the money coming during the next 15 months as the company reaches certain milestones such as employment targets. The EDC will also set aside $20 million to cover debt payments during the first three years if 38 Studios defaults.

The gaming company, which has yet to release a product, will receive the money from the state’s $125 million Rhode Island Loan Guaranty Fund.

The company announced in September it planned to move into offices at One Empire Plaza, a building once owned and occupied by Blue Cross & Blue Shield of Rhode Island.

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