May 12 Rhode Island will suffer a dramatic
downgrade to its 'AA' credit rating if lawmakers allow a default
on bonds the state backed for ex-Red Sox pitcher Curt
Schilling's now-defunct video game company, Standard & Poor's
Ratings Services warned on Monday.
The state has no legal obligation to pay debt service on the
$75 million of bonds it issued in 2010 on behalf of 38 Studios,
Schilling's company, and the bonds are insured. But the state
pledged its "moral obligation" to pay, and now legislators are
questioning whether to do so.
S&P also cut the 38 Studios' bonds themselves to 'BBB' from
'A' on Monday. And it placed those bonds, Rhode Island's general
obligation bonds, appropriation debt and moral-obligation backed
bonds on Creditwatch negative.
(Reporting by Hilary Russ, editing by G Crosse)