Jump to full article: Bond Buyer Online, 2008-12-16
Author: Audrey Dutton
Intro: 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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