RI taxpayers actually on the hook for $112.6M with 38 Studios

May 15th, 2012 at 10:01 am by under Nesi's Notes, On the Main Site

It’s unclear right now exactly what’s going on with 38 Studios’ finances and how serious the problems there are. But considering the headlines, it’s worth taking a look at how the original $75 million deal was structured.

In November 2010, the EDC borrowed $75 million from private investors on behalf of 38 Studios. The quasi-public agency agreed to pay back the bondholders with money 38 Studios pledged to provide from sales of its games. The interest rates on the bonds range from 6% to 7.75%.

Because the EDC technically sold “moral obligation bonds,” the governor is required to ask the General Assembly to appropriate money to repay the bondholders if 38 Studios can’t pay up – but the lawmakers are not required to pony up the money. It’s assumed they probably wouldn’t default, however.

So how much money could taxpayers be looking at spending? When you add together principal and interest payments, the total cost of paying off the 38 Studios bonds is projected to be $112.6 million through 2020, according to bond documents reviewed by WPRI.com. Here’s how much the payments are annually:

It’s worth noting that about $23.4 million from the original $75 million loan was set aside as a reserve to pay the bonds back, so there’s some money available in addition to whatever taxpayers fork over.

Standard & Poor’s affirmed its A rating on the 38 Studios bonds, with a stable outlook, on April 20. Asked about this week’s developments, a spokesman for the rating agency told WPRI.com its analysts do not comment on rumors. The bonds are insured by Assured Guaranty Ltd.

Update: Just to clarify, Rhode Islanders are on the hook for $112.6 million in principal and interest payments on the 38 Studios bonds between now and 2020, but not every dime will need to come from taxpayers. As I mentioned above, $23.4 million was set aside in case something went wrong. Subtracting the $23.4 million from the $112.6 million total bill would put Rhode Island taxpayers’ direct tab at around $89.2 million.

More 38 Studios coverage on WPRI.com:

This post has been updated and expanded.

Tags: , , ,

102 Responses to “RI taxpayers actually on the hook for $112.6M with 38 Studios”

  1. [...] The money from this auction would slightly lessen the burden on Rhode Island taxpayers, who will have to pay $112m (this figure includes interest) by the year 2020. [...]

  2. [...] investering is? Toen was het opeens veel te laat. Overigens is de lening inmiddels opgelopen tot 112,6 miljoen dollar en is de verwachting dat al deze miljoenen uit de zakken van de burgers van Rhode Island moeten [...]

  3. [...] Related: RI taxpayers actually on the hook for $112.6M with 38 Studios (May 15) Tags: 38 studios, bonds, edc, [...]

  4. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  5. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  6. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  7. [...] Between the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  8. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  9. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  10. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  11. [...] Between the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  12. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  13. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  14. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  15. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  16. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  17. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  18. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  19. [...] Between the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  20. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  21. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  22. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  23. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  24. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  25. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  26. [...] a strange $ 75 million loan as well as interest, Rhode Island taxpayers could be on a offshoot for as most as $ 90 million as a outcome of a deal. The $ 75 million was cumulative by a Rhode Island EDC as a approach to tempt 38 Studios to pierce [...]

  27. [...] to enter the videogame business vanishes from the face of the earth, leaving behind nothing but a greater-than-$100M bill for taxpayers to pay, the state legislature continues to move ahead with its plan to fast track the [...]

  28. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  29. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  30. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  31. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  32. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  33. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  34. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  35. [...] a strange $ 75 million loan as well as interest, Rhode Island taxpayers could be on a offshoot for as most as $ 90 million as a outcome of a deal. The $ 75 million was cumulative by a Rhode Island EDC as a approach to tempt 38 Studios to pierce [...]

  36. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  37. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  38. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  39. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  40. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  41. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  42. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  43. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  44. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  45. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  46. [...] the original $75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $90 million as a result of the deal. The $75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  47. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  48. [...] the original $ 75 million loan and interest, Rhode Island taxpayers could be on the hook for as much as $ 90 million as a result of the deal. The $ 75 million was secured by the Rhode Island EDC as a way to entice 38 Studios to move from [...]

  49. [...] Josh Barro: Rhode Island should default on 38 Studios bonds May 29th, 2012 at 5:00 am by Ted Nesi under Nesi's Notes, On the Main Site var addthis_product = 'wpp-264'; var addthis_config = {"data_track_clickback":true,"data_track_addressbar":false};if (typeof(addthis_share) == "undefined"){ addthis_share = [];}If 38 Studios can’t pay off its $75 million EDC loan, as appears likely, it’ll be up to Rhode Island taxpayers to step in and cover the principal and interest payments bondholders are due through 2020, at a cost of nearly $90 million. [...]