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Announcement:

Moody's takes rating actions on tobacco settlement revenue bonds

26 May 2011

Approximately $1.6 billion of asset-backed securities affected.

New York, May 26, 2011 -- Moody's Investors Service has taken rating actions on 14 tobacco settlement revenue bonds. These bonds are securitizations of payments owed under a master settlement agreement (MSA) between certain domestic tobacco manufacturers and the 46 states and certain territories party thereto. Nineteen tranches in nine securitizations (approximately $883 million) were placed under review for possible upgrade, and 14 tranches in five securitizations (approximately $739 million) were placed under review for possible downgrade.

RATINGS RATIONALE

The rating actions, including adjustments to some actions published on December 21, 2010, are the product of Moody's updated views on future cigarette consumption and other inputs used in our cash flow modeling of tobacco settlement revenue bonds. The updated views are presented in the addendum to our updated methodology referred to below.

The primary factor affecting the amount of the MSA payments and, consequently, cash flow to the securitizations is cigarette consumption. The consumption of cigarettes has been subject to a secular volume decline as a result of rising cigarette prices, the growing consumer awareness of the health risks associated with tobacco products, restrictive regulations, and wide availability of smoking cessation products. Total domestic cigarette consumption as measured by federal excise tax data and reported by National Association of Attorneys General (NAAG) in years 2007-2010, has declined by 4.8%, 3.8%, 9.2% and 6.4%, respectively.

Our updated modeling assumptions for domestic cigarette consumption include two cases, both of which have a mean consumption decline of 4% and a standard deviation of 5%. Case A, which is our base case, provides for a 2% to 9% range of annual consumption declines in the first two years and a 0% to 11% range of consumption declines in each of the subsequent years. Case B, which will be used for tranches targeting ratings of A3 or higher, provides for a wider range of 2% to 10% annual consumption declines in the first two years, and 1% to 15% in the subsequent years. For a complete set of the updated cash flow assumptions please refer to the principal methodology mentioned below.

Since our December 2010 rating actions we performed in-depth analyses and cash flow modeling using our updated assumptions for every rated transaction. The tranches that we are placing under review for possible downgrade are not likely to withstand the updated stresses primarily as a result of high leverage and low debt service coverage ratios (DSCRs). Conversely, the tranches that we are placing under review for possible upgrade benefit from lower leverage and higher DSCRs, often significant cash reserves and relatively short-term maturities, which minimize the impact of the cigarette consumption declines in the long term.

In addition, we correct an input error related to the two Convertible Appreciation Bonds issued in the Ulster Tobacco Asset Securitization transaction. In our previous analyses we neglected to increase the principal balances of these bonds by the accrued interest amounts. Consequently, the calculation of the interest payments was based on the lower bond balances, causing the amount of cash available for principal amortization to be overstated. As a result of the correction we are placing the bonds under review for possible downgrade.

The principal methodology used in rating these issues is "Moody's Approach to Rating Tobacco Settlement Revenue Securitizations," published on May 25, 2011.

A spreadsheet with these actions including CUSIP identifiers may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF240996

The complete rating actions are as follows:

Issuer: Buckeye Tobacco Settlement Financing Authority, Tobacco Settlement Asset-Backed Bonds, Series 2007 (State of Ohio)

Series 2007A-1-11 Senior Current Interest Serial Bonds, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Series 2007A-1-12 Senior Current Interest Serial Bonds, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Issuer: California Statewide Financing Authority (Pooled Tobacco Securitization Program) , Series 2002

Ser. 2002A Serial Bonds 13, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Ser. 2002B Serial Bonds 13, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Issuer: District of Columbia Tobacco Settlement Financing Corporation, Series 2001

Term Bond 1, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Term Bond 2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Term Bond 3, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: Golden State Tobacco Securitization Corporation (2007 Indenture)

CI Bds A-1-12, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

CI Bds A-1-13, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Issuer: New York Counties Tobacco Trust II, Series 2001

Super Sinker Term Bond 1, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Super Sinker Term Bond 2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Super Sinker Term Bond 3, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: Niagara Tobacco Asset Securitization Corporation, Series 2000

Term 3, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: Northern Tobacco Securitization Corporation, Series 2006

2006-A-1, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Issuer: Rensselaer Tobacco Asset Securitization Corporation, Series A

Super Sinker Term Bond 2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Super Sinker Term Bond 3, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Issuer: Rockland Tobacco Asset Securitization Corporation, Series 2001

Super Sinker Term Bond 1, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Super Sinker Term Bond 2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Super Sinker Term Bond 3, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: The California County Tobacco Securitization Agency (Stanislaus County Tobacco Funding Corporation), Series 2002

Ser. 2002A Term Bond 1, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Ser. 2002A Term Bond 2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Issuer: Tobacco Settlement Financing Corporation (New Jersey), Series 2007-1

2007-1A Term Bond 1, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

2007-1A Serial Bond 9, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

2007-1A Serial Bond 10, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

2007-1A Serial Bond 11, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

2007-1A Serial Bond 12, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Issuer: Tobacco Settlement Financing Corporation (Virgin Islands), Series 2001

Term Bond 1, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Term Bond 2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Issuer: Tobacco Settlement Financing Corporation, Series 2002A and 2002B

Ser. 2002A Tax-Exempt Term Bond 1, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec 21, 2010 Confirmed at Baa3 (sf)

Issuer: Ulster Tobacco Asset Securitization Corporation, Series 2001

Term CI Bond-1, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Term CI Bond-2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Term CCA Bond-1, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

Term CCA Bond-2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade

New York
David Nathanson
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Irina Faynzilberg
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's takes rating actions on tobacco settlement revenue bonds
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