- Associated Press - Wednesday, May 21, 2014

PROVIDENCE, R.I. (AP) - Rhode Island’s House speaker said he had a “very fruitful” meeting Wednesday with two Wall Street ratings agencies as lawmakers weigh the harm of possibly defaulting on bonds that financed the state-backed loan to 38 Studios.

Democratic Speaker Nicholas Mattiello declined to say what his own position is after the meetings in New York City with Moody’s and Standard & Poor’s. But he said he is leaning in one direction.

Mattiello called a closed caucus with fellow Democrats for Thursday afternoon to discuss the issue. Some lawmakers say taxpayers shouldn’t be on the hook for the failed investment, which was financed with “moral obligation” bonds, for which there is no binding repayment requirement.

“It was a very fruitful fact-finding effort,” Mattiello told reporters of his trip with Majority Leader John DeSimone. “I’m comfortable that I understand the issue at this point. I’m comfortable that I have the correct perspective at this point.”

Mattiello would not say specifically what the agencies told them, but he said they heard similar messages from both and noted that “credit rating agencies tend to maintain consistency.”

Moody’s and Standard & Poor’s have warned of downgrades, possibly by multiple notches, if the state defaults. That would make borrowing more expensive.

A state-commissioned analysis by SJ Advisors predicted that Rhode Island’s bond rating would sink to junk status if the state walked away from the debt. Some have criticized that conclusion as unlikely or alarmist.

Gov. Lincoln Chafee has insisted the state should pay, saying that default would harm Rhode Island’s economic recovery and jeopardize the lawsuit over 38 Studios’ collapse. The company, founded by former Red Sox pitcher Curt Schilling, went bankrupt in 2012.

The suit brought by the former Economic Development Corp. is an attempt to recoup at least some of the money the state stands to lose in the deal that gave 38 Studios a $75 million state-guaranteed loan.

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