RI hires analyst to review a possible default on 38 Studios debt

The state of Rhode Island is looking into the financial impact of a possible default on the 38 Studios bonds, according to the Providence Journal.

The Chafee administration has hired analyst Steven J. Johnson to begin a "robust" study of both the financial and reputational impact that could result by defaulting on a loan guarantee the state gave bondholders who assumed financial responsibility for the game studio.

Following the studio's filing for bankruptcy in 2012, bondholders were owed roughly $112.6 million, including $75 million in initial borrowing and $37.6 million in interest over 10 years.

State taxpayers could owe $89.2 million on the state-backed loan, which includes a $2.5 million taxpayer payment to bondholders come May, followed by $12.5 million every year for the next seven years.

Johnson will spend a month reviewing the 38 Studios financial material before reporting back to state officials. A response is expected by mid-April.

Last year, Rhode Island lawmakers budgeted $50,000 to study what might happen if the state defaulted on its $75 million loan guarantee to former Red Sox pitcher Curt Schilling's bankrupt 38 Studios. The state sent proposals to 30 firms and advertised in publications like the Wall Street Journal.

Former Red Sox pitcher Curt Schilling's 38 Studios declared bankruptcy in June 2012. In November 2012, the state filed suit over a $75 million loan guarantee extended to the developer. A judge's ruling in August 2013 allowed the lawsuit to proceed, and depositions began in late October. An auction for remaining assets was set for later that year.

You can follow Polygon's continuing coverage of the 38 Studios saga in Polygon's StoryStream.