Expert Warns RI Lawmakers About Defaulting on 38 Studios Loan

An independent analyst who looked at the Rhode Island 38 Studios loan repayment plan said that defaulting on the debt related to the $75 million loan plus other penalties and interest would damage Rhode Island's bond rating to junk status and could harm the state's overall business climate.

The report from Minnesota-based SJ Advisors said that defaulting on the loan would bring increased borrowing costs and harm to the state's reputation, and could lead to a "contagion effect impacting other Rhode Island issuers and even taint the business environment."

The firm also said that the most likely scenario with a default would see the state paying nearly $126 million more than the cost of honoring the debt. Even under the best-case scenario, the state would pay $36 million more.

The Rhode Island General Assembly called for the outside analysis last year after some lawmakers strongly supported not paying the debt back.

The report ultimately shows that lawmakers are not always the sharpest knives in the drawer…

House Speaker Nicholas Mattiello (D-Cranston) has not taken a position on repaying the debt associated with the failed loan.

"This report provides House members with some good information that will help us to formulate a fact-based decision on the bond repayment," he said in a statement. "The report will be considered, along with the examination of various aspects of this issue by the House Finance and Oversight committees."

Source: AP

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