Analysts: Racketeering Suit Won't Harm Tobacco Bonds

Vadum, Matthew
March 2003
Bond Buyer;3/19/2003, Vol. 343 Issue 31596, p32
Trade Publication
The U.S. government's 289 billion dollar racketeering lawsuit against the tobacco industry is unlikely to have much of an impact on new or outstanding municipal bonds backed by future payments under the 206 billion dollar national settlement with the states, regardless of the egal outcome of the federal case, analysts have said on March 18, 2003. President George W. Bush administration's reinvigoration of the lawsuit, which was initiated in September 1999 by former President Bill Clinton administration, puzzled some sources because they consider the current administration to be relatively friendly to the tobacco industry and because U.S. Attorney General John Ashcroft had publicly questioned the strength of the government's case. Despite the surprise of some municipal market participants that Ashcroft is pressing forward with the federal lawsuit, analysts believe the suit—which alleges the tobacco companies engaged in fraudulent and dangerous marketing practices over a half century —is unlikely to succeed and will not put the 19.1 billion dollar in tobacco securitization bonds that have been issued since 1999 in danger of default. The largest tobacco settlement securitization was conducted by Golden State Tobacco Securitization Corp. in California, which sold 2.63 billion dollar in tobacco bonds in January.


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