ProPublica

Journalism in the Public Interest

Tobacco Debt

Politicians wanted upfront cash from a legal victory over Big Tobacco, and bankers happily obliged. The price? A handful of states promised to repay $64 billion on just $3 billion advanced. More »

An updated tally by ProPublica shows that tobacco bondholders are due $2.6 billion of the $6 billion in this year’s payouts to state and local governments from Big Tobacco. More »

Even when taxpayers aren’t explicitly on the hook, tobacco bonds can cost states and local governments money. Here’s how. More »

States and localities got cash up front but may end up paying back a lot more than they expected. More »

New York counties were promised annual payments from tobacco companies as part of a national settlement to reimburse them for smoking-related costs. They could either get small payments indefinitely or take a lump sum immediately by entering into "securitization" deals. See how the deals shaped up.

After the 1998 settlement, Wall Street helped turn Big Tobacco's annual payments to states into upfront cash by selling bonds to investors. Some of the deals included a form of high-risk debt, capital appreciation bonds, which obligated governments to pay out billions of their tobacco income in the future. More »

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Top Tobacco Bond Banker Departs Barclays

Kym Arnone handled more than $40 billion in deals in which states and other governments borrowed against income from the landmark tobacco legal settlement of 1998.

Another Big Tobacco Bond Deal, Cajun Style

Facing a giant budget deficit, Louisiana Gov. Bobby Jindal plans to borrow $750 million against future income from a landmark legal settlement with cigarette makers.

Years After Tobacco Deals Sold, SEC Says Rating Agencies Still Conflicted

The latest Securities and Exchange Commission examination of credit rating firms found problems similar to those documented in ProPublica's investigation of tobacco bonds.

Behind New Jersey’s Tobacco Bond Bailout, A Hedge Fund’s $100 Million Payday

When New Jersey decided to bail out some of its tobacco bonds, the state gave up $400 million in future revenues to pocket $92 million immediately, an arrangement that also helped one savvy investor cash in on a big bet.

What Investment Bankers Say About Rating Agencies Behind Their Backs

Bankers Brought Rating Agencies ‘To Their Knees’ On Tobacco Bonds

Wall Street pressed S&P, Moody’s and Fitch to assign more favorable credit ratings to their deals and bragged that the raters complied. Now many of the bonds are headed for default.

Scoring the Latest Tobacco Bond Bailout: Investors $10, Taxpayers $1

Chautauqua County, N.Y. helped a bondholder get nearly $6 million for bottom-of-the-barrel debt – the bondholder let the county keep $600,000.

Tobacco Settlement Funds Sprinklers, Golf Carts and a Grease Trap

In Niagara County, N.Y., leaders took on 40-year debt to pay for short-term stuff, a case study in the perverse incentives tobacco bonds create.

How One New York County Fell Into the Tobacco Debt Trap

A refinance of Niagara County’s tobacco bonds was good news — but for investors, not taxpayers.

How We Analyzed New York County Tobacco Bonds

Users can see how interest rates and declining cigarette sales affect the bottom line for counties that borrowed against income from the landmark tobacco settlement.

Podcast: In Big Tobacco Cash, a Boon Turned Burden

Reporter Cezary Podkul on why states’ deals with investors yielded money upfront but problematic debts later.

Investors Haul In Nearly Half the Tobacco Settlement Cash

How Tobacco Bonds Work, and What Can Go Wrong

States and localities got cash up front but may end up paying back a lot more than they expected.

Tobacco Bonds May Be Dangerous to Your State’s Financial Health

After a bruising legal fight, tobacco companies agreed in 1998 to compensate 46 states, the District of Columbia and five U.S. territories for the health-related costs of smoking. Wall Street helped turn their annual payments into upfront cash by selling bonds to investors.

How Wall Street Tobacco Deals Left States With Billions in Toxic Debt

Politicians wanted upfront cash from a legal victory over Big Tobacco, and bankers happily obliged. The price? A handful of states promised to repay $64 billion on just $3 billion advanced.

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