Gov. Chafee's Office Analyzing Cost of Defaulting on 38 Studios Loan

May 28, 2013

Gov. Lincoln Chafee’s administration is doing a financial analysis on the cost of not paying back investors who underwrote the state’s loan guarantee for failed video game maker 38 Studios.

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The governor has said it’s important for the state’s reputation to pay back the 38 Studios loan. Chafee’s spokeswoman, Christine Hunsinger, said several state agencies and department heads are conducting an analysis on the cost of not paying back those bondholders.

Protestors rally in downtown Providence against paying back a $75 million guaranteed loan to 38 Studios.
Credit Don Borman / RIPR

“These situations very rarely occur, where states have a conversation about not paying their obligations,” said Hunsinger, “so the data is hard to compile and it’s not as simple as some would make it seem.”

Bryant University’s Gary Sasse has faulted the Chafee administration for what he calls a lack of due diligence on the 38 Studios loan. It hinges on moral obligation bonds, which means the state is not legally obligated to repay them. Taxpayers were on the hook for about $100 million once 38 Studios went belly up.

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