MOODY'S TO REVIEW TOBACCO SETTLEMENT ABS DEALS FOLLOWING REVIEW FOR POSSIBLE DOWNGRADE OF ALTRIA AND PHILIP MORRIS
Approximately $19 billion of Asset-Backed Securities Affected.
New York, March 27, 2003 -- Moody's Investors Service announced today that it will review its ratings
on all outstanding tobacco settlement receivables securitizations.
This affects both the tobacco settlement receivables and legal fee settlement
transactions. The rating action follows Moody's review of Altria
Group Inc. ("Altria"), Kraft Foods Inc. and Philip
Morris Capital Corp. for possible downgrade on March 24,
2003. Altria is a holding company, controlling 100%
of Philip Morris International, Philip Morris USA and Philip Morris
Capital Corp. ("Philip Morris"), and 84% of Kraft
Foods Inc.
Moody's ratings review of Altria and Philip Morris was prompted,
in turn, by the March 21 verdict of an Illinois Third Circuit Court
judge, who found Philip Morris U.S.A. liable
in a class-action consumer fraud lawsuit (the Miles case) and ordered
the company to pay $7.1 billion in compensatory damages
(including $1.78 billion in lawyers' fees), and $3
billion in punitive damages to the state of Illinois. Although
the judgment has been stayed by the judge, Philip Morris U.S.A.
will have to post a bond for $12 billion to stay execution of the
judgment when the verdict is entered.
Philip Morris retains about a 50% share of the tobacco market,
and payments from Philip Morris represent roughly 50% of the cash
flows payable under the Master Settlement Agreement (the "MSA"),
which settled the litigation between the states and the tobacco manufacturers.
"The credit rating of a tobacco manufacturer is an indication of the likelihood
of bankruptcy. For a bankruptcy of a tobacco manufacturer to affect
the cash flows of a tobacco settlement transaction adversely, a
series of joint events would need to occur: bankruptcy, retention
of significant market share by the bankrupt manufacturer, rejection
of the MSA in bankruptcy, and failure of the Model Statute,"
said Nicolas Weill, a senior vice president in Moody's structured
finance group.
"A major change in the creditworthiness of Philip Morris, an important
party to the MSA, would alter the probability of these events and
could ultimately have a significant impact on the cash flows to the tobacco
settlement transactions. This, in turn, might prompt
Moody's to downgrade the various tobacco settlement transactions,"
added Weill.
Furthermore, increased vulnerability of the tobacco industry to
litigation would negatively affect the outlook on the industry and have
a negative impact on the ratings of the tobacco settlement transactions.
The transactions that have been put under review for possible downgrade
are:
For additional information, visit our website at www.moodys.com
Legal Settlements
· Legal Settlement Resecuritization Trust 2003-A
· Legal Settlement Trust 2002-A
· Legal Settlement Trust 2001-A
· Litigation Settlement Monetized Fee Trust - Pass-Through
Certificates, Series 2001-1
· Litigation Settlement Monetized Fee Trust III
· Litigation Settlement Monetized Fee Trust IV
· Litigation Settlement Monetized Fee Trust V
Tobacco Settlements
· Alabama 21st Century Authority, Series 2000
· Alabama 21st Century Authority, Series 2001
· Arkansas Development Finance Authority, Tobacco Settlement
Revenue Bonds Series 2001
· Badger Tobacco Asset Securitization Corporation (Wisconsin)
· California Statewide Financing Authority (Pooled Tobacco Securitization
Program)
· Children's Trust, Series 2002 (Commonwealth of Puerto Rico)
· District of Columbia Tobacco Settlement Financing Corporation,
Series 2001
· Educational Enhancement Funding Corporation, Series 2002A
and 2002B (South Dakota)
· Erie Tobacco Asset Securitization Corporation, Series 2000A
and 2000B
· Golden State Tobacco Securitization Corporation
· Guam Economic Development Authority, Series 2001A and 2001B
· Monroe Tobacco Asset Securitization Corporation, Series
2000
· Nassau County Tobacco Settlement Corporation, Tobacco Settlement
Asset Backed Bonds Series A
· New York Counties Trust I, Series 2000
· New York Counties Trust II, Series 2001
· Niagara Tobacco Asset Securitization Corporation, Series
2000
· Northern Tobacco Securitization Corporation, Series 2000
(Alaska)
· Northern Tobacco Securitization Corporation, Series 2001
(Alaska)
· Rensselaer Tobacco Asset Securitization Corporation, Series
A
· Rockland Tobacco Asset Securitization Corporation, Series
2001
· The California County Tobacco Securitization Agency (Fresno County
Tobacco Funding Corporation), Series 2002
· The California County Tobacco Securitization Agency (Gold Country
Settlement Funding Corporation), Series 2002
· The California County Tobacco Securitization Agency (Golden Gate
Tobacco Funding Corporation), Series 2002
· The California County Tobacco Securitization Agency (Merced County
Tobacco Funding Corporation), Series 2002
· The California County Tobacco Securitization Agency (Sonoma County
Securitization Corporation), Series 2002
· The California County Tobacco Securitization Agency (Stanislaus
County Tobacco Funding Corporation), Series 2002
· The California County Tobacco Securitization Corporation (Alameda
County Tobacco Asset Securitization Corporation), Series 2002
· The Children's Trust Fund, Series 2000 (Commonwealth of
Puerto Rico)
· Tobacco Securitization Authority of Northern California,
Series 2001A and 2001B
· Tobacco Securitization Authority of Southern California,
Series 2001
· Tobacco Settlement Authority (Washington State)
· Tobacco Settlement Authority (Iowa), Series 2001A and 2001B
· Tobacco Settlement Financing Corporation (Rhode Island)
· Tobacco Settlement Financing Corporation, Series 2003 (Virginia)
· Tobacco Settlement Financing Corporation (Virgin Islands),
Series 2001
· Tobacco Settlement Financing Corporation, Series 2001A
and 2001B (Louisiana)
· Tobacco Settlement Financing Corporation, Series 2002 (New
Jersey)
· Tobacco Settlement Revenue Management Authority, Series
2001A and 2001B (South Carolina)
· TSASC, Inc - Tobacco Flexible Amortization Bonds
(New York)
· TSASC, Inc. 2002-1 (New York)
· Ulster Tobacco Asset Securitization Corporation, Series
2001
· Westchester Tobacco Asset Securitization Corporation, Tobacco
Settlement Asset Backed Bonds, Series 1999
New York
Michael Kanef
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Nicolas S. Weill
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653