Officials in California have tapped reserves for payments on two series of state tobacco bonds due to the state’s receiving ‘insufficient’ tobacco settlement revenue, according to a Reuters story quoting notices filed with the Municipal Securities Rulemaking Board on Monday.
The draws indicate how municipal bond issuers that sold debt backed by settlement revenue must contend with the effects of declining sales of tobacco products.
Moody’s Investors Service was said to be taking the decline so seriously that it said in July a majority of tobacco bonds sold by US states, counties and cities would default if cigarette consumption kept falling at a 3-4 per cent annually.
States, counties and cities have sold nearly $40 billion of bonds backed by the $246 billion in payments that US cigarette makers agreed to make to them over 25 years.
Settlement payments vary from year to year as they are based mainly on the number of cigarettes sold.
The full story is at: http://www.reuters.com/article/2012/12/03/municipals-tobacco-bonds-idUSL1E8N3F2D20121203.
Category: Breaking News