Published June 19, 2013
Curt Schilling was the toast of New England when he led the Boston Red Sox to World Series glory in 2007, but these days he's a goat after his ill-fated video game company went belly-up and left Rhode Island holding a near-$100 million loan guarantee that now threatens the Ocean State's bond rating.
Moody's Investor Services downgraded the state-backed "moral obligation" bonds Schilling's 38 Studios had already defaulted on after learning state lawmakers were considering a second default. The bond rating agency also said it could downgrade the state's overall rating if it doesn't honor the debt, which started as a $75 million loan and has ballooned with interest. Schilling's company, which once employed 450 people, folded in 2012, with the onetime superstar — who earned more than $100 million in salary during his career — saying he lost his own fortune.
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, according to a report by the Rhode Island Public Expenditure Council.
“Broadly, default on the payment for the 38 Studios loan guaranty will have an impact on the state in many ways, both seen and unseen,” the report stated. “However, there are no current precedents for the consequences of state default. In fact, no state has defaulted on a bond since the Depression, when Arkansas defaulted on a 1933 payment.”
Moody's said it acted after learning some lawmakers favor defaulting.
“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.”
Gov. Lincoln Chafee wants the state to pay the debt and an $8.2 billion House budget proposal includes outstanding payments for the Schilling debt. Christine Hunsinger, a spokeswoman for Chafee, said the Democratic governor is “cautiously optimistic” that the new proposal will ultimately pass.
“While the governor has said all along that it wouldn’t be in the state’s best interest to not pay the moral obligation debt, the statement from Moody’s makes that clearer,” Hunsinger told FoxNews.com. “So the governor is cautiously optimistic since the House budget does contain the payment that the full House and Senate will approve the moral obligation payment.”
Schilling, 46, retired in 2009 after 20 seasons. He won 216 games and three World Series rings and is perhaps best remembered for pitching in the 2004 American League Championship for the Boston Red Sox with a blood-stained sock due to an injured ankle. He has reportedly earned more than $114 million in salary throughout his career but said during an interview last summer that his failed venture has cost him his entire fortune.
“I’m tapped out,” he told WEEI-FM in Boston.
Schilling, whose company relocated from Massachusetts in 2010 after Rhode Island offered a loan guarantee based on state officials’ claims that it would lead to 450 jobs and millions in tax revenue, did not respond to requests for comment on Wednesday.
The company took its name from Schilling’s longtime uniform number and entered bankruptcy in May 2012, leaving more than 300 employees in Rhode Island and Maryland out of work.
Schilling has said life for his family will likely change as a result of the massive loss, but he’s not seeking condolences.
"I'm not asking for sympathy,” he said last summer. “It was my choice. I chose to do this, I wanted to build this, I wanted to create the jobs and create something that had a long-standing, world-changing effect. And we were close. We were close to getting there, and it fell apart."
The Associated Press contributed to this report.