Moody’s, S&P may delay 38 Studios loan

PROVIDENCE, R.I. (WPRI) - The two ratings agencies vetting a $75 million state-backed loan to Curt Schilling’s video game company will not finish their work until around Labor Day, which may delay the loan’s closing until the end of next month, a state official said Friday.

Analysts at Moody’s Investors Service and Standard & Poor’s are preparing to issue a bond rating for investors to use in deciding whether to buy a piece of the $75 million debt offering by 38 Studios, Fred Hashway, the R.I. Economic Development Corporation’s director of government affairs, told Eyewitness News.

The EDC’s board of directors voted last month to provide a taxpayer guarantee for the $75 million loan in order to get Schilling to move 38 Studios’ headquarters from Maynard, Mass., to Rhode Island. The controversial deal has been criticized by some politicians but strongly defended by Gov. Donald Carcieri.

• Related: Long odds for RI-backed Schilling game (Aug. 3)

The loan was originally expected to close by the end of this month, but this week EDC officials said the process would not be completed until September, “probably closer to the end of the month,” Hashway said.

Wells, Barclays selling loan

The investment banking divisions of San Francisco-based Wells Fargo & Co. and London-based Barclays Plc are the underwriters on the $75 million loan, Hashway said. They are reaching out to institutional investors who may be interested in buying a piece of the debt offering.

The two banks, along with state officials and 38 Studios executives, decided to pay two ratings agencies to vet the loan in order to attract a larger pool of potential buyers, he said.

Earlier this month, a 38 Studios spokeswoman told Eyewitness News the company would not be answering reporters’ questions about the loan until the transaction is finished.

There is no bond prospectus for the 38 Studios loan because it is a private transaction, and the ratings agencies’ research will serve as the main documentation in advance of the bond sale, Hashway said.

Closing on the 38 Studios loan is more complicated than closing on a house, Hashaway said. “The difference between a residential and a sophisticated commercial transaction is like saying a horse and airplane are both forms of transportation,” he said. “It’s just very different.”