Tobacco Bonds Holding Their Own, Despite S&P Downgrade

Albanese, Elizabeth
April 2003
Bond Buyer;4/22/2003, Vol. 344 Issue 31619, p3
Trade Publication
Tobacco bonds on April 21, 2003 were still trading at rates in the same range as last week despite a downgrade Friday by Standard & Poor's Corp. of the majority of tobacco-securitized debt. Tobacco bonds were selling yesterday at between 75 cents on the dollar and 85 cents on the dollar, said Michael Marz, a vice chairman at First Southwest Co. That is up from early last week, when the bonds were trading as low as 65 cents on the dollar. Poor's follows actions by Fitch Ratings Inc. and Moody's Investors Service Inc., which both lowered the ratings of tobacco debt by as much as three notches two weeks ago in response to concerns that an Illinois lawsuit might bankrupt Philip Morris USA Inc. That company makes more than half of the total payments currently received by 46 states under the terms of the 1998 Master Settlement Agreement as reimbursement for the cost of caring for patients with tobacco-related illnesses. Fitch announced yesterday that all tobacco debt ratings by that agency remain on rating watch negative, as does the corporate credit for both Altria and its subsidiaries and R.J. Reynolds Tobacco Holdings Inc.


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