Former Major League Baseball pitcher Curt Schilling’s 38 Studios video game company not only went bankrupt, but is now also threatening to damage Rhode Island’s credit rating. Rhode Island gave the company a $100-million loan guarantee to get the business to relocate to the state in 2010.
Schilling moved his company from Massachusetts to Rhode Island after he got a “loan guarantee based on state officials’ claims that it would lead to 450 jobs and millions in tax revenue.” In May of 2012, the company filed for bankruptcy and 300 of its employees in Rhode Island and Maryland were out of work.
On Wednesday, Moody’s said it could downgrade the state’s overall credit rating if it does not honor the debt. Moody’s already downgraded the “moral obligation” bond.
“The potential for a decision by the legislature to withhold funds to replenish the debt service reserve signals potential unwillingness to honor its obligations to bondholders,” Moody’s said in a statement. “Selectivity regarding which obligations to honor leads us to question our confidence in the full faith and credit of the state and its willingness to honor its other debt obligations compared to otherwise similarly-rated states.”
According to Fox News, “not honoring the debt would save the state $89.2 million, but could make it more expensive for the state to borrow money over the next decade,” as Moody’s indicated.
There is no precedent, for no state has defaulted on a bond since the Great Depression.
A spokeswoman for Rhode Island Gov. Lincoln Chafee said Chafee wanted the state to pay the debt and was “cautiously optimistic” a bill would pass along for the state to do so.
Schilling made at least $110 million in his career but admitted he is “tapped out” and lost all of his fortune investing in the video game company.