November 23, 2024 11:03 AM
By Staff Reporters
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Tobacco bonds are a form of municipal debt securities and securitized debt whose payment obligations are tied to a master medical lawsuit settlement agreement between 46 states and several major U.S. tobacco companies.
In exchange for the states settling their lawsuits against the tobacco industry for recovery of tobacco-related health care costs and exempting the tobacco companies from private tort liability regarding harm caused by tobacco use, the companies agreed to curtail or cease certain tobacco marketing practices and to pay, in perpetuity, various annual payments to the states to compensate for the medical costs of tobacco-related illnesses.
These tobacco industry payments have been securitized into municipal bonds. One underlying risk, among others, is that if certain conditions are met, the tobacco companies may reduce or suspend part of their payments.
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Posted by Dr. David Edward Marcinko MBA MEd CMP™
Categories: "Ask-an-Advisor", Accounting, Financial Planning, Funding Basics, Glossary Terms, Investing
Tags: bonds, health, lifestyle, smoking, tobacco, tobacco bonds
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