BONDS: Tobacco

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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PHILLIP MORRIS: Healthcare Revenue Down

By Staff Reporters

Philip Morris International Inc. abandoned a goal to get at least $1 billion of revenue from healthcare and wellness products next year following setbacks at companies it has acquired in the sector.

The tobacco company has built a health and wellness unit around the purchases of UK inhaler maker Vectura Group Plc and Fertin Pharma, the producer of a smoking-cessation aid. PMI just took a $680 million impairment charge after unsuccessful clinical trials for an inhalable aspirin product as well as slower-than-expected development of other products.

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PMI paid more than $1 billion for Vectura and about $820 million for Fertin in 2021. Vectura scientists faced a backlash after the acquisition, with the company getting kicked out of a medical conference due to its link to the tobacco industry.

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