Frank Caprio has again suggested that the $75 million taxpayer-backed bond sale for 38 Studios might not be completed, WRNI’s Ian Donnis reports. Here’s Caprio’s quote during a Greater Providence Chamber of Commerce forum this morning, via Ian:
It was July it was going to close, it was August, it was September – it’s [now] October 19th and there’s a lot of opportunities for people to invest money today and the fact that this hasn’t been taken up as quickly as people thought speaks volumes.
As someone who’s keeping close tabs on the deal’s progress, I’m not so sure it does – though the EDC is now hinting the deal may not close until November.
First off, Caprio is wrong when he asserts that the 38 Studios transaction was originally supposed to close in July. The R.I. Economic Development Corporation board didn’t even approve the deal until July 26, and at that time the EDC projected an Aug. 31 closing.
Caprio is right, though, when he notes that first August, then September and now half of October have all passed without the deal being completed, and that the EDC has been way too optimistic in its projections of how quickly it could get done.
Rob Stolzman, an EDC lawyer, admitted as much to me in an e-mail last week. “The original closing date target for the end of August, early September was ambitious given the nature of the transaction, but possible,” he said. “The slippage [from the original closing date target] remains the result of typical adjustments and advances in the transaction.”
Stolzman, like other EDC officials, was emphatic that the $75 million transaction has not run off course. He said the deal should close “within the next few weeks or so” – which would give us a new target of early November – and said no “new or unusual issues” have come up since the agency sat down to brief three Projo reports and me a month ago.
(I’ve reached out to Stolzman to check, once again, whether anything has changed since we exchanged e-mails last week, and I’ll update when I hear back.)
Stolzman pointed to a longer-than-expected wait for 38 Studios to sign the lease for its offices-to-be at One Empire Plaza as one reason for the continued delay in closing the deal. “38 Studios was required to sign their lease before the underwriters began soliciting investors,” he said. “That took a few weeks longer than hoped for, but the result was well worth the slight delay.”
If that’s the case, Barclays and Wells Fargo – the two banks marketing the $75 million worth of bonds to investors – may not even have started scouting for buyers until the last week of September, after the lease was executed for One Empire Plaza.
As an aside, the continued delay in closing the deal could create an awkward moment when it finally is completed – at this rate, the deal may close within days of Rhode Islanders electing a new governor who is firmly opposed to the $75 million guarantee. The agency has dismissed requests from the candidates that it hold off until Gov. Donald Carcieri’s successor takes office; in fact, EDC Executive Director Keith Stokes specifically said he wants it done “before the next administration is in place.”
Can’t get enough of Nesi’s Notes’ 38 Studios coverage? There’s much more where this came from!
(image credit: 38Gamers.com)