economic development

Schilling’s 38 Studios bond closes, governor-elect disappointed

THE R.I. Economic Development Corporation announced Wednesday that it had sold $75 million in bonds to help finance Curt Schilling’s gaming company 38 Studios.
Posted 11/3/10

PROVIDENCE – The R.I. Economic Development Corporation announced Wednesday that it had sold $75 million in bonds to help finance the expansion of 38 Studios LLC and its relocation to Providence from Massachusetts and Maryland.

The EDC says the move by the gaming company founded by former Red Sox pitcher Curt Schilling will create 450 jobs and spark the creation of a video-gaming industry in the state.

The announcement of the bond sale, one day after the election, immediately drew fire from Governor-elect Lincoln Chafee, who staunchly opposed the deal as a candidate.

“We’re very disappointed that the deal has closed,” Mike Trainor, a Chafee aide and former campaign manager, said on Wednesday. “His 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.”

Trainor said Chafee planned to review the deal but stopped short of saying if the governor-elect would specifically explore ways to reverse the closing.

“Our focus right now is to protect the Rhode Island taxpayer and beyond that we’re not going to speculate on what actions we may or may not take,” Trainor said.

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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