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US securitized bonds: Making hay from tobacco

Four tobacco companies have agreed to pay a proportion of their revenues to 46 US states and territories as compensation for the costs of treating tobacco-related conditions. This amounts to $206 billion over the next 25 years. The master settlement agreement is the largest civil settlement in US history. It has created a massive opportunity for the securitization market, as recipients become keen to turn these future flows into cash now. Even the lawyers want their future fee receivables securitized. Recipients are worried lest any future settlements or event risk bankrupt tobacco companies before they make over these windfall payments. They want bond holders to take that risk. Kay Binnie reports

A Philip Morris advertisement Flickers across a New York television screen advising viewers that the recent tobacco settlement agreement "restricts the marketing of tobacco products ...bans all tobacco company billboards and transit advertising...no more tobacco logos on clothing or merchandise...no more cartoon characters selling cigarettes...strictly prohibits marketing tobacco products to kids...". It's a rather humble announcement, where once gloss, seduction, image, indulgence and temptation dominated.

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