No One Bids on Proposal to Study 38 Studios Loan Payback Options

Last summer lawmakers passed a measure to make an initial $2.5-million payment to the investors who purchased the state-backed bonds that financed Schilling’s now-bankrupt video-game company, 38 Studios.

At the time the state also earmarked $50,000 to study what the effect would be if the state decided to default on the loan – mostly to satisfy disgruntled fellow lawmakers and angry taxpayers. The state put out a proposal to companies to bid on conducting that research. The deadline for financial-industry experts to bid for the contract was on Oct. 25, with the winning bid completing a study on the issue by Dec.

But no one bid on the proposal – and even those who the state contacted directly were not interested in bidding on the project. Instead of telling the general public, lawmakers quietly canceled the proposal.

Asked why that happened, Governor Chafee’s administration director, Richard A. Licht, said: "No one bid on it."

"We did advertise it in several places," he said, name checking the Bond Buyer and the Wall Street Journal, "and we sent it out to about 30 different prospective firms. Eight or nine made inquiry about it … no one bid. That’s why we canceled it.… So we are considering what our other options might be. And we will ultimately, hopefully, get someone who will do this study for us."

Rhode Island taxpayers will be forced to pay as much $89.2 million on Schilling’s state-backed loan, including the initial $2.5-million taxpayer payment to the bondholders on May 1, 2014, and $12.5 million in each of the next seven years.

If the state does not pay back the loan, it could be one of the first states since the Great Depression to not pay back a loan. It could also face a credit downgrade from financial ratings firms, making it more difficult to borrow money in the future.

Source: Providence Journal

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    Atrayo says:

    Hi There,

    This is the nightmare for the State of Rhode Island funding projects it has no idea what they're getting involved with in practice. I can understand on the Federal level with the SBA (Small Business Administration). But, the entity of the State itself acting like a Venture Capitalist. They had seed investment money burning a hole in their pocket.

    To be fair we're hearing about this one horror story. But, how many other companies have benefited from this program run by the State of Rhode Island?

    If this program was a one off with 38 Studios within the domicile of Rhode Island. Than I would fire the person or financial firm that suggested this would be a good deal for the State. Besides admonish the legislator(s) that placed this in a Bill for their State Congress to gain funding.


    Hi Sleaker,

    Although i'm not following this story day in and out. The State of Rhode Island must've allowed the issuing of State bonds to finance this venture from 38 Studios. State bonds much like municipal bonds for a city help fund public works projects like infrastructure. But the bone heads of Rhode Island did this for a private for profit venture that went belly up. I guess the Ethics oversight board of the State of Rhode must've asleep at the switch. Where transparency wasn't high on the agenda on this investment.

    I wonder where were any advocacy groups for the citizens of Rhode Island? Probably sidelined and ignored as usual due to a legislator or his staff slipping a line item for funding into a State Bill that was unrelated. Bad Ninja's.

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