S&P may cut Calif., N.J., Va. tobacco bonds

Standard & Poor's said it placed ratings on nine classes from four U.S. tobacco settlement securitizations on CreditWatch with negative implications.

S&P said it took the action due to revisions in assumptions about U.S. cigarette industry volumes and the relative market shares of the manufacturers participating in the 1998 settlement with 46 states, the District of Columbia, and several U.S. territories, which may make it impossible to pay timely interest and full principal on the bonds

The affected debt includes $4.446 billion series 2007 bonds issued by Golden State Tobacco Securitization Corp. maturing June 1, 2047, including series 2007-B, with an original balance of $271.957 million (rated BBB) and series 2007-C, with an original balance of $78.547 million (rated BBB-).

Also included are $3.622 billion series 2007-1 bonds issued by Tobacco Settlement Financing Corp. of New Jersey maturing June 1, 2041, including series 2007-1A, with an original balance of $1.264 billion (rated BBB).

The affected debt also includes $1.149 billion series 2007 bonds issued by Tobacco Settlement Financing Corp. of Virginia maturing June 1, 2047, including series 2007B-1, with an original balance of $335.625 million; series 2007B-2, with an original balance of $26.808 million; series 2007-C, with an original balance of $77.104 million; and series 2007-D, with an original balance of $27.086 million. All are rated BBB except series 2007-D, which is rated BBB-.

Also included are $255 million series 2005 bonds issued by Tobacco Securitization Authority of Northern California maturing June 1, 2045, including series 2005A-1, with an original balance of $85.57 million (rated BBB), and series 2005B, with an original balance of $11.674 million (rated BBB-).

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