RI makes new $2.2M payment on 38 Studios bonds

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PROVIDENCE, R.I. (WPRI) – Quietly and on schedule, the much-discussed 38 Studios bonds keep getting paid.

The R.I. Commerce Corp. confirmed Monday it made a $2.2 million payment on May 1 to investors who own the bonds, which were sold in 2010 to lure Curt Schilling’s doomed video-game company from Massachusetts to Rhode Island.

The company’s collapse in 2012 left Rhode Island taxpayers on the hook for about $90 million in principal and interest payments on the bonds. While some state lawmakers have strongly opposed paying them off, top state decision-makers have backed repayment.

The 38 Studios bond payments are due twice each year – on May 1 and Nov. 1 – until the last installment is made in November 2020. This year’s next scheduled payment is a $9.2 million installment due in November.

Rhode Island taxpayers currently owe a total of $74.3 million on the 38 Studios bonds – $59.7 million in principal plus $14.6 million in interest – now that this year’s May 1 payment has been made, according to a breakdown obtained by WPRI.com from the State Budget Office.

Target 12 reported in 2013 that two financial companies owned the majority of the 38 Studios bonds at the time: USAA, the Texas-based firm that focuses on military families, and Transamerica Corp., a subsidiary of the Dutch multinational Aegon.

The Chafee administration filed suit against the architects of the 38 Studios deal back in 2012 in an effort to win damages that could offset the cost of the bond payments; last November’s payment was partly funded with the proceeds from a $4.4 million settlement with two of the defendants in the suit.

R.I. Superior Court Judge Michael Silverstein is currently weighing a motion for summary judgment in the 38 Studios suit; a trial date hasn’t been set yet. (Separately on Monday, a lawyer for the state asked Silverstein to unseal various documents in the case.)

Gov. Gina Raimondo, House Speaker Nicholas Mattiello and Senate President M. Teresa Paiva Weed all support using taxpayer money to pay the 38 Studios debt, which are known as moral-obligation bonds. Raimondo has included $12.5 million in her proposed 2015-16 budget to cover the next two installments.

Even debating the possibility of not paying the 38 Studios bonds has spooked some investors. Gurtin Fixed Income Management, a California-based firm that manages $9 billion in assets, stopped buying Rhode Island state debt and urged its clients to sell following the controversy last year.

This table from the original 38 Studios bond documents lays out the annual cost of the debt payments:

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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