Rhode Island House Speaker Nicholas Mattiello believes the state should repay debtors who backed the failed $75 million loan guarantee to former Red Sox pitcher Curt Schilling's bankrupt 38 Studios, The Associated Press reports.
Mattiello made his comments after he and House Majority Leader John DeSimone met with representatives from credit rating agencies Moody's and Standard & Poors last week.
"We need to pay to protect the credit rating of Rhode Island," Mattiello said. "I am not going to put Rhode Island on the default list. The reputation of the state will not be harmed any further."
A report conducted by SJ Advisors and released by The Rhode Island Department of Administration earlier this month warned that defaulting on the debt could reduce the state's bond ratings to junk status. Mattiello said last week that "a moral obligation is your commitment to pay," referring to the nature of the deal, in which there is no legal requirement to repay. In early May, Rhode Island made a $2.4 million payment to investors who backed the loan — the first such with funds not originally earmarked for repayment.
Intending to bring the developer and 450 jobs to the state, Rhode Island and The Rhode Island Economic Development Corporation (now known as the Rhode Island Commerce Corporation) backed the loan guarantee in 2010, but 38 Studios declared bankruptcy in June 2012. The state filed suit later that year maintaining that those involved in approving the deal did not disclose all of the risks associated with the loan guarantee. Documents released last week indicate that members of 38 Studios, including its CEO and board director, sought to keep its possible underfunded status from those approving the guarantee.
State lawmakers have debated not paying debt since 38 Studios declared bankruptcy. The new chairwoman of the Rhode Island House Committee on Oversight, Rep. Karen MacBeth, proposed legislation in 2013 and in 2014 that would prevent the state from continuing to make payments.
In January, after the Rhode Island House of Representatives passed a bill to encourage settlements, Mattiello said that it was also designed "to get monies in sooner to the state of Rhode Island, so that we can use that as one of the things that we consider in dealing with this very complex and difficult issue."
You can follow along with the continuing story of 38 Studios' loan guarantee in Polygon's StoryStream.