Caprio puts Schilling deal in jeopardy

PROVIDENCE, R.I. (WPRI) - General Treasurer Frank Caprio waited a month to voice his opposition to the Curt Schilling loan agreement , but he made up for the delay Tuesday when he came out swinging against it, possibly putting the deal in serious jeopardy.

Gov. Donald Carcieri was blindsided and angered by Caprio’s public criticism of the deal, which began in an interview published in this morning’s edition of the elite financial newspaper Bond Buyer and continued in a lengthy press release the treasurer’s gubernatorial campaign released laying out his opposition.

The governor responded with some pointed words of his own in a late-afternoon statement. He took both Caprio and his gubernatorial opponent Lincoln Chafee to task for opposing the agreement , which calls for Rhode Island taxpayers to guarantee a $75 million private loan to Schilling’s video game company, 38 Studios.

“Businesses and the bond market should not be subject to political posturing,” Carcieri said. He also pointed out that last spring the General Assembly all but unanimously approved the new $125 million loan program 38 Studios is tapping.

Top Democratic state lawmakers, including House Speaker Gordon Fox and Senate President M. Teresa Paiva Weed, praised the deal when the EDC board approved it last month. The pair had been in discussions with 38 Studios executives since February, according to EDC Executive Director Keith Stokes.

Chafee's spokesman, Michael Trainor, told The Providence Journal the former senator was "grateful for Treasurer Caprio's change of heart" and that it was Chafee's "fervent hope that the rising tide of public concern will cause a collapse of investment banking support for this deal" so the next governor could reexamine it.

Treasury role is key

Caprio’s comments could have more serious consequences than Chafee’s.

In addition to the Bond Buyer interview, over the last two days Caprio brought his concerns directly to analysts at Moody’s and Standard & Poor’s, the two credit-rating agencies that are currently evaluating the 38 Studios guarantee . The transaction is expected to close by the end of September, according to EDC officials.

On top of that, the financiers working on the deal will check in with the treasurer’s office to ensure its soundness and the accuracy of the state’s financial disclosures. “They basically look to his office to determine the endorsement of the state, so could it kill the deal? Yes it could,” David Layman, a spokesman for the treasury, told Eyewitness News.

Caprio’s campaign spokesman, Nick Hemond, said analysts at the two rating agencies did not inform the treasurer during his discussions with them whether they would give the debt offering a favorable review after hearing his concerns. They are expected to release their decisions on the Schilling deal next week.

No longer 'a cheerleader'

Meanwhile, Caprio’s campaign spent the afternoon pushing back against the perception among political observers that the treasurer made an about-face on the Schilling agreement because Lincoln Chafee’s opposition to it was winning him support from voters.

They pointed to the delicate situation Caprio found himself in as both Rhode Island’s general treasurer – and therefore the man tasked with watching over the state’s fiscal health – and a candidate who could be governor come January.

The treasurer told WRNI last month that he would be “a cheerleader” for 38 Studios because at the time he thought it was “a done deal,” according to Hemond. The R.I. Economic Development Corporation’s board had approved the $75 million loan guarantee just days earlier.

Later, Hemond said, Caprio realized the deal was not completed. He suggested changes to the agreement – including an equity stake in 38 Studios and a board seat for the state – which were ignored by the EDC.

Hemond declined to specify whether Caprio would have supported the loan guarantee had the EDC agreed to his proposals. "It would have been a better deal," he said.