Fitch Ratings has affirmed 99 tranches of tobacco settlement ABS at 'BBB+sf', with a Stable Outlook. The affirmations are based on model-indicated grades above the tobacco sector rating cap of 'BBB+sf'. Fitch evaluates tobacco ABS structures by using a proprietary breakeven model. The cash flow model output indicates, for each class of bonds, the level of the annual MSA payment percentage change the transaction would be able to sustain and still pay timely interest and the principal in full by the maturity date.
Tobacco Settlement ABS are securitizations of the settlement reached by 46 U.S. states in 1998 to not pursue further legal action against the participating tobacco manufacturers for reimbursement of healthcare costs generated by smoking-related diseases. The settlement payments will be made in perpetuity, and over the last 14 years several U.S. states, counties, cities and territories elected to securitize a portion of these payments by issuing bonds with up to 50 years of maturity. Fitch currently has ratings on 249 tranches of Tobacco ABS issued by 38 legal entities. See the web file for a full list of rating actions.
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