The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

US capital markets: How the tobacco deal affects bonds

As the tobacco industry and the US government inched towards finalizing their historic $368.5 billion settlement on tobacco-related health claims, the news for the powerful industry was none too good. President Bill Clinton criticized the deal for undercutting the Food & Drug Administration's regulatory authority over tobacco. Joe Camel, the cartoon character that became a symbol of teenage nicotine addiction in the US, was relegated to marketing history by maker RJ Reynolds. And there was growing congressional criticism of the settlement's proposal to make the payments tax-deductible, which the White House said would rip a hole in the federal budget. Any deal must ultimately be approved by congress, and signed by the president, which is not expected until next year.

The conventional wisdom in the financial markets is that any ultimate settlement is good for tobacco. Bankers and analysts argue that it erases the uncertainty over the financial implications of the numerous pending class-action suits.

But the celebration may have come too soon. "The bottom line is that there's still a lot of uncertainty," says Nicole Delz Lynch, a credit analyst with Standard & Poor's, which has put affected tobacco companies - A rated Philip Morris, BBB rated RJR Nabisco Holdings, AA rated Loews and A+ rated BAT Industries - on credit watch, with negative implications.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree