Moody's, S&P Put Tabacco Debt Under Review, Citing Cigarette Makers' Woes

McDonald, Michael
March 2003
Bond Buyer;3/28/2003, Vol. 343 Issue 31803, p7
Trade Publication
Financial ratings agencies Moody's Investors Service Inc. and Standard & Poor's Corp. have put their municipal tobacco bond ratings under review on March 27, 2003, which can lead to downgrades and further increase the cost of the debt, as a result of concerns about the credit quality of cigarette company Philip Morris USA Inc. and the rest of the U.S. domestic cigarette industry. Moody's has a median rating of A1 on the tobacco bonds and Standard & Poor's has a median rating of A. The actions follow a similar move by Fitch Ratings, which put its ratings on nearly 18 billion dollars of tobacco bonds on rating watch negative on March 26. While the states and local governments that have sold tobacco bonds have factored in the possibility that some of the companies participating in the 1998 Master Settlement Agreement could go bankrupt, the rating agencies said a number of factors have been conspiring to increase the risk of tobacco bonds.


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