Tobacco settlement ABS bonds are not likely to experience increased liquidity risk in the short term, at least not because two tobacco companies diverted a portion of April's payments due to five states, according to Moody's Investors Service.

Last April, R.J. Reynolds Tobacco and Lorillard Tobacco made $2.6 billion in payments under the 1998 master settlement agreement (MSA) to California, New Hampshire, Massachu-setts, New Jersey and Ohio. The April payments, however, fell short by more than $750 million, which the companies placed in disputed payment accounts. Pending resolution of the dispute, the escrowed funds are not available to fund securitizations.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.