RI Treasurer Continues to Question Schilling Deal

August 11, 2010 -

Rhode Island Treasurer Frank Caprio is still attempting to poke holes in a $75 million guaranteed loan that helped lure Curt Schilling’s 38 Studios to the Ocean State from Massachusetts.

Speaking to Providence’s NBC 10 I-Team, Caprio, who is also a Democratic candidate for Governor, said that investors might be hesitant about buying into the $75 million "moral obligation" bonds because the nature of their structure makes them high risk and "there's nothing legally that would make Rhode Island pay off the investors."

Caprio continued:

The way this is structured now is structured in a similar way. There are minimal payments for the first 10 years, and then there's a balloon payment for about $45 million of the loan. And that's the major issue for the bond market. The bond market is saying, what faith would an investor have that 10 years from now some future legislature will appropriate a lump sum of $45 million for a failed deal?

While a spokesperson for the Rhode Island Economic Development Corporation, the organization behind the financing, stated that the group is “confident” it can make the investments attractive to the bond market, Caprio stated that the deal with Schilling is far from finalized, using baseball terms to state that it’s merely the first inning of a nine-inning game.


Comments

Re: RI Treasurer Continues to Question Schilling Deal

Caprio, all bonds are structured that way.  A bond is a security that is purchased at some nominal price, pays interests accross its lifespan, and then repays a lump sum on the maturity date.  Minimal payments for 10 years followed by a ballon payment on the maturity date is the definition of a bond.  The bond market is, naturally, used to this because that's how bonds work.  How is it possible a state treasurer could say something so stupid?

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