Moody's Downgrades 38 Studios' Bonds; Chafee "Confident" on Payment

Jun 17, 2013

Moody's Investors Service isn't taking lightly debate about whether to pay back bonds issued to fund the state's investment in 38 Studios. The agency has downgraded the 38 Studios' bonds and warned Rhode Island of other possible action:

Moody's Investors Service has downgraded Rhode Island Economic Development Corporation's Job Creation Guarantee Program (38 Studios LLC) to Baa1 from A2. At the same time, Moody's placed the Job Creation Guarantee rating under review for possible further downgrade. Moody's has also placed the state of Rhode Island's Aa2/negative general obligation and Aa3/negative related appropriation bond ratings under review for downgrade.

Moody's says it's action "reflects the considerable uncertainty surrounding the state legislature's willingness to appropriate funds requested in Governor Chafee's budget to replenish the capital reserve fund for the 38 Studios bonds."

Some lawmakers have pushed back on repaying the bonds.

Chafee has expressed no such doubt, arguing that not paying back the bonds would be harmful for the state's reputation and credit.

In a statement, he says:

“I am confident that we will continue to honor our obligations. We want to send a clear message to the investment community that Rhode Island is a place that will make the difficult but necessary decisions for the long-term health of our state.

I believe that the General Assembly will do the right thing to protect the reputation and borrowing ability of Rhode Island.”