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Pawlenty tobacco plan raises questions 

As part of his two-year budget proposal, Gov. Tim Pawlenty wants to borrow about $1 billion through the sale of state bonds. He would then dedicate future revenue from the state's tobacco lawsuit settlement to pay off the debt. The complicated transaction has some legislators scratching their heads and health advocates crying foul.

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Moody's removes NY tobacco bonds penalty on ruling 

Moody's Investors Service said on Friday it will no longer rate tobacco bonds of New York counties one notch lower than similar debt sold by other cities and states following a federal court ruling.

A judge for the Southern District of New York in the Second Circuit dismissed claims filed by a cigarette maker that had not joined the 1998 national settlement between states and cigarette makers, Moody's said in a statement.

The ruling by Judge Alvin Hellerstein, which he reached in November and finalized on Jan. 12, upheld a statute that requires payments even from cigarette makers that had not joined the settlement.

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• Budget Woes Expose Rifts Over Tobacco Money  

At least 17 states, including California and New York, have already sold bonds based on future tobacco settlement payouts and spent some or all of the money before they have it, according to the National Conference of State Legislatures. Moreover, cigarette taxes are also less lucrative than they were a decade ago because cigarette sales in the United States have dropped by more than 20 percent.

Nonetheless, two weeks into the year, conservative, tobacco-friendly states like Kentucky, Georgia and Mississippi are considering sizable tax increases on cigarettes, while some with liberal Democratic governors -- including Michigan, Ohio and New Mexico -- are looking at ways to redirect tobacco settlement money to close budget gaps or for economic stimulus packages.

Florida lawmakers have considered both options.

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State fails to find buyers for tobacco-money bonds  

State administrators have hit a glitch in their plan to gain $183 million in immediate cash for the rights to future payments from cigarette makers. The problem? Nobody wants to pay the asking price.

Legislators voted last year to sell off the rights to about $16 million a year that Iowa receives from tobacco companies. The payments are the result of a 1998 lawsuit settlement, in which the companies agreed to pay up to $2 billion to Iowa over 25 years.

Iowa sold off the rights to most of those payments for about $500 million in 2002. State officials hoped to do the same with what's left, but they have been unable to find investors willing to pay the asking price.

State Treasurer Michael Fitzgerald said the credit market has tightened, and the best he could hope to raise would be $130 million to $150 million. "Right now, nobody wants tobacco bonds," Fitzgerald said.

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High Court OKs 'Light' Cigarette Suits  

The court's opinion could be significant for the municipal market because tobacco manufacturers signed the Master Settlement Agreement with 46 states and six territories in 1998, agreeing to pay billions of dollars to them over a 25-year period, and muni issuers have sold tobacco bonds securitized by those annual payments.

The first debt - $709 million of tobacco bonds- was sold by New York City's TSASC Inc. in 1999.

In 2003, an Illinois judge ordered Altria to pay $10.1 billion in damages in a class action suit over light cigarettes. Tobacco bond credit downgrades followed soon after the decision.

Tobacco bond issuance slowed to a halt in 2004 because of litigation against cigarette companies. The companies withheld $755 million of annual settlement payments in 2006 during disputes over prior-year payment adjustments. They withheld another $696 million during a dispute over annual payments in 2004, which they said were unfairly inflated. The bonds regained strength in the market by the first quarter of 2007, representing 7.7% of all munis sold during the quarter.

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Light cigarette ruling to further sideline tobacco bonds  

A U.S. Supreme Court ruling on Monday allowing tobacco companies to be sued under state law for deceptive advertising of 'light' cigarettes will further sideline the issuance of tobacco bonds while making them an even riskier investment in the secondary market, municipal market participants said.

'As far as tobacco goes, this lights case pretty much shuts the door on the issuance of tobacco bonds for a while,' said Iowa Treasurer Mike Fitzgerald.

Iowa last year authorized a second securitization of its share of a 1998 settlement with U.S. tobacco companies as long as the bond sale could raise at least $183 million for capital projects.

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Time Warner, Philip Morris Lead $8.6 Billion Sales (Update1)  

Time Warner Cable Inc., the second- largest U.S. cable operator, and cigarette maker Philip Morris International Inc. led sales of $8.6 billion of debt this week, putting November on pace for the busiest month since June.

Corporate bond issuance has reached $18.6 billion in the U.S. since the end of October, compared with a monthly average of about $26 billion for the last three months, according to data compiled by Bloomberg. Sales fell from $10.8 billion last week, when Altria Group Inc., maker of Marlboro cigarettes, sold $6 billion of debt in the largest offering since May. . . .

Philip Morris, the world's largest publicly traded tobacco company, sold $1.25 billion of 6.875 percent debt maturing in 2014 on Nov. 12 in its first dollar debt sale since May. The notes are rated A2 by Moody's Investors Service and A by Standard & Poor's.

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AT&T, Philip Morris Lead Most Bond Sales in 10 Weeks (Update1)  

AT&T Inc., the largest U.S. telephone company, and cigarette maker Philip Morris International Inc. led $4.2 billion in bond sales, the biggest day in 10 weeks, amid signs of easing in short-term credit markets.

Four companies raised money with debt sales today, the first offerings this week, and the most since borrowers sold $5.25 billion of bonds on Sept. 3, according to data compiled by Bloomberg. Dallas-based AT&T sold $1.5 billion of five-year notes. Philip Morris, the world's largest publicly traded tobacco company, sold $1.25 billion of five-year notes in its first dollar debt sale since May.

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Fitch Places Golden State Tobacco Securitization Corp's Bonds on Rtg Watch Negative 

Fitch Ratings has placed the following Golden State Tobacco Securitization Corporation's Series 2007 bonds on Rating Watch Negative:

Series 2007A-1 senior current interest serial bonds:

--$27,335,000 due June 1, 2008 'BBB+';

--$30,730,000 due June 1, 2009 'BBB+';

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Altria Raises $6 Billion in Biggest Corporate Sale Since May  

Altria Group Inc., the maker of Marlboro cigarettes, sold $6 billion of notes in the company's biggest ever bond sale and the largest deal in the U.S. market since May.

Altria's sale is almost equal to the $6.7 billion of issuance in all of last week, according to Bloomberg data. The largest U.S. tobacco maker sold the debt in three-parts as yields over benchmark rates on corporate bonds fell for a second day.

``There is a trickle of new deals coming in,'' said Scott MacDonald, head of research at Aladdin Capital Management LLC in Stamford, Connecticut, which manages about $17 billion in assets. ``The bond market is open for a limited number of companies that have demonstrable cash flow.''

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Philip Morris Leads 16.6 Billion Euros of Bond Sales in Europe  

Philip Morris International Inc., the world's largest publicly traded tobacco company, and utility E.ON AG led 16.6 billion euros ($24.5 billion) of European corporate bond sales this week, the most in two months.

Sales jumped from 6.8 billion euros last week and from 6.5 billion euros the week before, according to data compiled by Bloomberg. New York-based Philip Morris raised a total of 1.75 billion euros in its first sale in the common European currency, prompted by concern credit conditions may deteriorate.

``We wanted to be ahead of the game and issue a smaller- sized transaction at current market spreads,'' Marco Kuepfer, vice-president and treasurer of Philip Morris, said in an interview.

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County goes for Big Tobacco gold 

It's pouring in Suffolk.

At least, that's the financial forecast from the county Legislature, which voted July 31 to securitize its tobacco settlement money, an option Suffolk officials said they had been holding in reserve for a rainy day. The transaction trades the long-term income for up-front cash to battle next year's projected $126 million revenue shortfall.

The Legislature decided 14-2, with one abstention, to entrust securitization of its tobacco income to the Suffolk Tobacco Asset Securitization Corp., a development corporation chaired by Chief Deputy County Executive Jim Morgo. The STASC plan involves selling the majority of Suffolk's yearly income from the 2001 settlement between 46 states and Big Tobacco for $185 million spread out over the next five years, with $60 million available toward the 2009 shortfall.

The deal has Suffolk trading off 36 percent of its settlement income through 2012, and then 75 percent through 2032, while receiving slightly less than 52 cents on the dollar total -- a number that could fluctuate depending on market factors, according to county financial advisers.

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Lawmakers: tobacco money is a short term fix-will cost more in long run 

The process of applying for benefits could become more difficult if tobacco funding is used to secure bonds to balance the state budget, citing the plan a short term fix lawmakers say.

Lt. Governor Brian Krolicki's plan to use tobacco settlement money instead of having to make major cuts to the budget is considered a short term fix by lawmakers because today's programs that receive tobacco bonds say the plan is poor social and fiscal policy that will cost more money in the long run.

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Fitch to Rate Tobacco Settlement Revenue Management Authority, Series 2008 (South Carolina) 

Fitch expects to rate Tobacco Settlement Revenue Management Authority, Tobacco Settlement Asset-Backed Refunding Bonds, Series 2008 (South Carolina) as follows:

--$298,260,000 Series 2008 Turbo Term Bonds, due June 1, 2018, 'BBB+'

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Philip Morris Plans to Sell $6 Billion of Bonds (Update2) 

Philip Morris International Inc. is marketing $6 billion of debt due in 5, 10 and 30 years in the tobacco company's first bond offering since being spun off in March by Altria Group Inc., according to a person familiar with the transaction.

The company plans to sell $2 billion of 5-year notes, $2.5 billion of 10-year notes, and $1.5 billion of 30 year bonds. All three will price to yield 177 basis points more than U.S. Treasuries of similar maturity, according to another person familiar with the matter, who declined to be identified because the terms aren't set.

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