Fitch Affs Tobacco Settlement Asset Securitization Corp. 1999 Indenture (NYC), Series 2006-1.
--$284,070,000 turbo term bonds due June 1, 2022 at 'BBB+', Stable Outlook;
--$137,765,000 turbo term bonds due June 1, 2026 at 'BBB+', Stable Outlook;
--$372,650,000 turbo term bonds due June 1, 2034 at 'BBB+', Negative Outlook;
--$599,025,000 turbo term bonds due June 1, 2042 at 'BBB+', Negative Outlook.
The affirmations are based on the level of stress each class is able to withstand as indicated by Fitch's new breakeven cash flow model. The model indicates, for each class of bonds, the level of the annual Master Settlement Agreement (MSA) payment percent change the trust would be able to sustain and still pay the bond in full by the legal final date. The base case 'B' corresponds to a 1% increase in the MSA payment received by the trust every year. The 'BBB' category corresponds to an annual MSA payment decline of up to 1.25%. The cash flow model accounts for the amount of the latest MSA payment that the transaction has received, the capital structure, the reserve account, and the bonds' legal final dates.
The bond payments are also tied to the tobacco companies making MSA payments. Tobacco settlement bonds can be rated up to 'BBB+' based on Fitch's view of the whole tobacco industry and the executory nature of the MSA. In the event of a bankruptcy of a tobacco company, Fitch believes there is an incentive for the company to continue to make payments under the MSA.
Although the delinked rating of the bond due on 2022 suggested by the model is 'A-', the bond rating is at the capped rating of 'BBB+' with a Stable Rating Outlook. The bond due on 2026 is affirmed at the 'BBB+' cap as supported by the model output with a Stable Rating Outlook. The bonds due on 2034 and 2042 are affirmed at 'BBB+'; however, the model output suggests that these bonds are under pressure with lower breakeven levels compared to the other 'BBB+' bonds. Therefore the bonds are being assigned a Negative Outlook because of the possibility of these bonds being downgraded depending on the amount of the future MSA payments received by the trust regardless of the industry assessment.
Tobacco Settlement Asset Securitization Corporation (TSASC) 1999 Indenture (New York City), series 2006-1 bonds are secured by the pledged payments made under the MSA. The pledged payments consist of New York's share of perpetual annual payments and strategic contribution payments by the original participating manufacturers (OPMs) and subsequent participating manufacturers (SPMs). The OPMs at the time of the original agreement were Philip Morris USA, Inc.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; and Lorillard Tobacco Company. The amount of annual MSA payments received by the trust are mainly affected by the tobacco consumption level and inflation rate, as well as state specific adjustments, as specified in the MSA.
|Printer friendly Cite/link Email Feedback|
|Date:||Jun 22, 2009|
|Previous Article:||Fitch Affirms Rensselaer Tobacco Asset Securitization Corporation (New York) Series A 2001.|
|Next Article:||Vertex[R] Named IBM Cognos[R] New OEM Partner Solution of the Year.|