Dwindling tobacco cash puts state bonds in jeopardy.

From my daily American Association for Justice email –

tobacco cash puts state bonds in jeopardy.

The New York Times (5/4, Walsh, Subscription Publication) reports, “Steady declines in smoking, a big win for public health, are creating problems for municipal bond investors.” Several bonds “backed by yearly payments from tobacco companies under a landmark settlement with 46 states are in the earliest stages of default, and more distress is expected.” The Times adds, “Dozens of states, counties and cities issued the bonds to receive billions of dollars upfront from the 1998 settlement,” but are seeing smaller-than-expected payments as US tobacco sales decline. The Times also notes a renewed legal dispute between the states and big tobacco firms as the companies withhold nearly $8 billion in settlement payments pending resolution of the legal questions.