Tobacco bond

In finance, a tobacco bond is a type of US bond issued by a state to obtain immediate cash backed up with a won lawsuit against a tobacco company. The typical tobacco bond lasts 30 years or less and pays interest every year.[1]

By 2014, tobacco bonds made up $94 billion of the $3.7 trillion municipal bond market. They share a revenue stream from the Tobacco Master Settlement Agreement, a 1998 national settlement in which Philip Morris, Lorillard and Reynolds American agreed to make annual payments to states in perpetuity to resolve liabilities for health-care costs related to smoking. Some states — Alaska, California, Iowa, Michigan, New Jersey, New York, Ohio, Rhode Island, West Virginia, as well as Washington, D.C., Puerto Rico and Guam — borrowed against the funds, which are based on cigarette shipments.[2][3]

Issued

California

The state of California issued $3.1 billion in tobacco bonds in 2005.[4]

Rhode Island

The state of Rhode Island issued $618 million in tobacco bonds in March 2015.[5]

See also

References
  1. Podkul, Cezary (18 August 2014). "How Tobacco Bonds Work, and What Can Go Wrong". Pro Publica. Retrieved 25 February 2015.
  2. Chappatta, Brian (24 September 2014). "Tobacco Bonds Seen Cheap as Default Forecast Raised: Muni Credit". Bloomberg Business. Retrieved 5 March 2015.
  3. Estes, Jim (6 October 2014). "How the Big Tobacco Deal Went Bad". The New York Times. Retrieved 3 March 2018.
  4. Cherney, Mike (2 April 2013). "California Tobacco Bond Sale a Hit With Investors". Wall Street Journal. Retrieved 8 March 2015.
  5. Smith, Kate (3 March 2015). "Rhode Island $618 Million Tobacco Bond Ends Seven-Month Wait". Bloomberg. Retrieved 8 March 2015.
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