Tobacco Bonds on Watch

Albanese, Elizabeth
March 2003
Bond Buyer;3/27/2003, Vol. 343 Issue 31802, p1
Trade Publication
Fitch Ratings Inc. placed approximately 18 billion dollars of tobacco bonds on rating watch negative on March 26, 2003, after an Illinois judge last week ordered the nation's largest tobacco manufacturer, Altria Group Inc., to pay a 12 billion dollar appeal bond in a lawsuit brought by smokers of light cigarettes. Fitch has rated most of the approximately 19.85 billion dollars of tobacco bonds issued to date, giving the debt its A-plus rating based on coverage levels and the strength of Altria's A rating. Fitch managing director Kevin Duignan said his agency considers the strength of the four major tobacco manufacturers — Philip Morris USA Inc., RJR Tobacco Holdings, Lorillard Tobacco Co. and Brown & Williamson — that make payments to 46 states under the 1998 Master Settlement Agreement a key factor in the viability of tobacco bonds. Philip Morris officials have said the bond amount is so high the firm might have to declare bankruptcy.


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