Fitch Publishes Exposure Draft for Rating U.S. Tobacco Settlement ABS

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has published an exposure draft with respect to its criteria for rating U.S. Tobacco Settlement ABS. Fitch invites feedback on the proposals during the consultation period that will end on July 22, 2015. The agency will continue to apply its current criteria until the finalization of the revised criteria which Fitch expects to publish in July 2015 following the review of comments received during the consultation period.

The main proposals upon which feedback is sought are:

--Application of the most recent MSA payment received as the starting point on Fitch's cash flow model.

The exposure draft discloses the application of the most recent MSA payment on Fitch's cash flow mode. The starting point in Fitch's break-even analysis is the most recently received MSA payment amount net of any one-time cash receipts. However, there may be instances where Fitch will adjust the starting payment amount to account for volatility. Such instances will be described in the related presale report.

--Revising the rating floor to 'CCCsf' from 'B-sf'.

Given the long tenor of most tobacco bonds, the upside potential from potential higher inflation rates or further NPM-disputed amounts and other factors, Fitch will apply a rating floor of 'CCCsf', unless it determines that default of some kind appears 'probable' ('CCsf') or 'imminent or inevitable' ('Csf') due to a high break-even rate that is unlikely to be resolved in the remaining time to maturity.

Ratings Impact:

Fitch expects about 64 notes to be downgraded from the changes proposed above.

Additional information is available at 'www.fitchratings.com'

U.S. Tobacco Settlement ABS Criteria Exposure Draft

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867456

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150622006279/en/

Fitch Ratings
Jenny Ovalle
Associate Director
+1-212-908-0849
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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