Investors may be wary about buying the $75 million in bonds to finance Curt Schilling's video game company because of the way the deal is currently structured, the NBC 10 I-Team reported.
The Rhode Island Economic Development Corp.'s financing deal involves moral obligation bonds. But those types of bonds carry high risk, according to General Treasurer Frank Caprio.
The reason?
Down the road, Caprio said, if Schilling's company fails, there's nothing legally that would make Rhode Island pay off the investors and that makes investors nervous.
Caprio likens the current deal to a person who tells a bank they want a mortgage where they pay only a small amount each of the first 10 years and then a balloon payment at year 10.
"The way this is structured now is structured in a similar way. There are minimal payments for the first 10 years, and then there's a balloon payment for about $45 million of the loan. And that's the major issue for the bond market. The bond market is saying, what faith would an investor have that 10 years from now some future legislature will appropriate a lump sum of $45 million for a failed deal?" Caprio said.
Caprio wrote a letter to the EDC suggesting improvements in the bond deal to give Rhode Island taxpayers the upper hand.
But a spokesman for the EDC said even with the less desirable moral obligations bonds, "We are confident that we can structure these to make them attractive to the bond market."
The so-called Shilling deal is a long way from being complete. Caprio said it's the first inning of a nine-inning game.
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