Fitch Publishes Updated Criteria for Rating U.S. Tobacco Settlement ABS

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has updated its criteria for rating U.S. Tobacco Settlement ABS. Existing ratings previously placed on Rating Watch Negative will be impacted by these changes. (For additional details, see Fitch's press release dated Aug. 6, 2015.) Fitch expects to resolve the outstanding Negative Rating Watches within 90 days.

The main changes to the criteria are:

Adjustments to the Starting Payment Amount:

The updated criteria discloses the assumptions Fitch uses in its cash flow model, which incorporate break-even rates for possible declines of the master settlement agreement (MSA) payment amount. Fitch's starting point in the break-even analysis is the most recently received MSA payment amount net of any one-time cash receipts. However, adjustments will be made to account for cash flow changes due to nonparticipating manufacturers (NPM) and Participating Manufacturer (PM) credits as defined in the 2012 NPM Adjustment Settlement Agreements or any future agreements.

Elimination of Rating Floor:

Fitch has eliminated use of a rating floor in its analysis of tobacco settlement ABS. For bonds with a maturity date of 10 years or more and a break-even rate greater than 0.50%, the implied rating level will be at the 'ccc' category. For bonds with a maturity less than 10 years and a break-even rate between 0.51% and 1%, the implied rating will also be at the 'ccc' category. For bonds with a maturity less than 10 years and with a break-even rate greater than 1%, the implied rating will be at the 'cc' category. However, in any scenario deemed appropriate, the rating committee may assign a different rating than that of the implied rating category.

Additional information is available on www.fitchratings.com

U.S. Tobacco Settlement ABS Criteria

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871847

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Jul 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752340

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151005006694/en/

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

Source: Fitch Ratings

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