June 18, 2014 / 10:26 PM / 4 years ago

UPDATE 1-S&P lifts threat of Rhode Island downgrade on debt agreement

(Adds background, additional debt affected)

June 18 (Reuters) - Standard & Poor’s Ratings Services removed its threat of a Rhode Island downgrade on Wednesday, citing lawmakers’ passage of a fiscal 2015 budget that includes $12.3 million to pay for bonds issued on behalf of ex-Boston Red Sox pitcher Curt Schilling’s now-defunct video game company.

S&P affirmed its AA rating on the state’s general obligation bonds and removed its creditwatch negative. The bonds have a stable outlook.

In 2010, Rhode Island’s economic development agency issued $75 million of bonds on behalf of Schilling’s company, called 38 Studios, in order to lure it to Rhode Island from Maynard, Massachusetts.

The state backed the bonds with its “moral obligation,” but not a more explicitly binding legal commitment to pay. The bonds are also insured but choosing to default likely would have led credit rating agencies to downgrade Rhode Island into junk territory.

S&P also affirmed its AA- rating on Rhode Island’s appropriation debt and A on its moral obligation-backed bonds, except those issued for 38 Studios, which are rated BBB. (Reporting by Hilary Russ; Editing by Chris Reese and Cynthia Osterman)

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