An arbiter's ruling last week might prompt several tobacco companies to reduce pending April payments to states under the 1998 Master Settlement Agreement (MSA). Although these cash flows are used to securitize billions of dollars in ABS deals, market sources only expect the potential shortfall to adversely affect the scheduled turbo payments on those deals.

Last Monday, the group of tobacco companies obligated to make payments under the settlement agreement, known as Participating Manufacturers, won an arbiter's ruling which said that advertising restrictions imposed by the 1998 MSA were a significant contributing factor to their loss of market share in U.S. cigarette sales. The provision says that if this settlement's restrictions cause the PMs to lose market share collectively by two percentage points, they might be entitled to reduce the amount that they are scheduled to pay the 46 participating states on April 17.

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