EDC: 38 Studios loan delay not unusual

PROVIDENCE, R.I. (WPRI) - The state may not close on its $75 million loan to Curt Schilling's video game company until early October, but officials say there is nothing unusual behind the delay.

"We always thought this would occur sometime in September — it's likely to occur now or in early October," Robert Stolzman, a lawyer for the R.I. Economic Development Corporation, said Thursday. "I can assure you there is no substantive, shocking issue."

EDC Executive Director Keith Stokes said the agency is "looking to close [on the transaction] somewhere over the next several weeks, before the next [governor's] administration is in place."

Moody's Investors Service and Standard & Poor's are expected to release their debt rating on the $75 million bond issue for the company, 38 Studios, "within a week," Stolzman said.

The EDC also plans to publicly release the official bond document, known as a preliminary private placement memorandum, ahead of the final sale of bonds to institutional investors by underwriters Barclays and Wells Fargo. That will come out shortly after the bond ratings are finalized, he said.

In a briefing with reporters Thursday, EDC officials led by Stokes strongly defended their decision to provide a taxpayer guarantee to 38 Studios in order to get the company to move its headquarters from Massachusetts to Rhode Island and eventually employ 450 people here.

"This is a very sophisticated company," said EDC Deputy Director J. Michael Saul. "This is not about Curt Schilling."

The proposed deal has drawn heavy criticism from some politicians, including gubernatorial candidates Lincoln Chafee and Frank Caprio, the latter of whom intervened with Moody's and S&P to suggest they should block the deal.

The questions Moody's and S&P asked after speaking with Caprio "were not unusual for any transaction," Stolzman said. The agencies' analysts are "very sophisticated and very smart people, and they understand the environment and the nature of this transaction," he added.

38 Studios has narrowed its search for a new headquarters down to several locations in the Providence metro area, Stolzman said. The company must sign a lease in the state before it can start receiving proceeds from the $75 million loan.

"Providence fits the culture of the company," Stokes said.

Stolzman also said the EDC has confirmed that Curt Schilling himself has invested more than $30 million of his own money in 38 Studios. The former Red Sox ace had referenced that figure in an interview with WEEI earlier this summer.

Stolzman also said 38 Studios has "very little debt," and reports that Schilling has loaned the firm $20 million are incorrect.

The loan agreement will include provisions stipulating that proceeds from the $75 million cannot be used to repay Schilling or other founding investors in the firm.

tnesi@wpri.com