In finance, a tobacco bond is a type of US bond issued by a state to obtain immediate cash backed up with a won lawsuit against a tobacco company. The typical tobacco bond lasts 30 years or less and pays interest every year.[1]

By 2014, tobacco bonds made up $94 billion of the $3.7 trillion municipal bond market. They share a revenue stream from the Tobacco Master Settlement Agreement, a 1998 national settlement in which Philip Morris, Lorillard and Reynolds American agreed to make annual payments to states in perpetuity to resolve liabilities for health-care costs related to smoking. Some states — Alaska, California, Iowa, Michigan, New Jersey, New York, Ohio, Rhode Island, West Virginia, as well as Washington, D.C., Puerto Rico and Guam — borrowed against the funds, which are based on cigarette shipments.[2][3]

Issued

California

The state of California issued $3.1 billion in tobacco bonds in 2005.[4]

Rhode Island

The state of Rhode Island issued $618 million in tobacco bonds in March 2015.[5]

See also

References

  1. ↑ Podkul, Cezary (18 August 2014). "How Tobacco Bonds Work, and What Can Go Wrong". Pro Publica. Retrieved 25 February 2015.
  2. ↑ Chappatta, Brian (24 September 2014). "Tobacco Bonds Seen Cheap as Default Forecast Raised: Muni Credit". Bloomberg Business. Retrieved 5 March 2015.
  3. ↑ Estes, Jim (6 October 2014). "How the Big Tobacco Deal Went Bad". The New York Times. Retrieved 3 March 2018.
  4. ↑ Cherney, Mike (2 April 2013). "California Tobacco Bond Sale a Hit With Investors". Wall Street Journal. Retrieved 8 March 2015.
  5. ↑ Smith, Kate (3 March 2015). "Rhode Island $618 Million Tobacco Bond Ends Seven-Month Wait". Bloomberg. Retrieved 8 March 2015.
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