Nearly three-quarters of senior tranches of the tobacco settlement bonds will default should cigarette consumption in the U.S. continue on its current rate of annual decline, said Moody's Investors Service in a report.Specifically, the rating agency finds that if the decline in consumption continues at a 3% to 4% pace, as Moody's projects, bonds constituting 74% of the aggregate outstanding balance of all the tobacco settlement bonds will default.

The finding is consistent with current ratings on the tobacco settlement bonds, 79% of which are rated at B1 or below, says Moody's in the report Sustained Decline in Cigarette Consumption Rates Will Cause Many Tobacco Settlement Bonds to Default.

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