House speaker to meet with bond rating agencies
Rhode Island's House speaker will meet with two Wall Street ratings agencies as he tries to determine the cost of a potential default on the bonds that financed the failed 38 Studios deal, his office said Tuesday.
Speaker Nicholas Mattiello, D-Cranston, planned to travel with Majority Leader John DeSimone, D-Providence, to New York City after Tuesday's legislative session ahead of a decision on whether to repay the bonds. Spokesman Larry Berman said meetings are scheduled Wednesday morning with Moody's and Standard & Poor's.
The ratings agencies have warned of downgrades if Rhode Island were to default, which would make borrowing more expensive.
A state-commissioned analysis released this month predicted Rhode Island's bond rating would sink to junk status. Minnesota-based SJ Advisors said that, even under the best-case scenario, it would be less costly for Rhode Island to make the payments.
Some lawmakers say taxpayers shouldn't have to foot the bill for the remaining $87 million owed under the deal that gave 38 Studios a $75 million state-guaranteed loan.
The company, founded by former Red Sox pitcher Curt Schilling, went bankrupt in 2012. The economic development agency that approved the guarantee is suing over its collapse, saying its board was duped into signing off on the deal.
The Chafee administration has said the state should pay the bonds, no matter how distasteful it is. The governor maintains default will harm the state's already slow economic recovery and jeopardize the former Economic Development Corp.'s suit against Schilling and others, which aims to recoup at least some of the money the state stands to lose.
Senate President Teresa Paiva Weed, D-Newport, supports repaying the bonds.
The House Oversight Committee has been hearing testimony on the issue. Wealth manager Robert Cusack last week suggested the speaker meet with the ratings agencies to determine what effect default would have on the state's general obligation bonds.
Mattiello's office calls the trip "part of their fact-finding mission to be fully informed about the repayment of the 38 Studios moral obligation bond." Moral obligation bonds are not legally binding.
"They will utilize this information, along with the input provided by the House Finance and Oversight committees and the House members, to formulate a position on the bond repayment in the weeks ahead," Berman said.