Tobacco Settlement Bonds: A Look At The Effect Of Securitization on the Credit of Sttates Using Capital Appreciation Bonds

James Estes ()
Additional contact information
James Estes: California State University San Bernardino

No 2703037, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: Tobacco Settlement bonds have been issued by several states to obtain early use of funds awarded to them in the Tobacco Master Settlement Agreement (MSA) of 1998. The MSA awarded monies in perpetuity to states to settle claims and lawsuits against the tobacco industry that had been ongoing for over a decade. Nine states, and Washington, DC, Puerto Rico, and Guam, have chosen to cash in on future MSA payments by issuing capital appreciation bonds in order to receive funds immediately and postpone any type of repayment for 55 years. This paper critically analyzes how using capital appreciation bonds backed by diminishing future MSA revenue streams will inevitably lead to default and higher borrowing costs in all bonds for these states and territories.

Keywords: tobacco settlement bonds; capital appreciation bonds; default; securitization (search for similar items in EconPapers)
JEL-codes: G11 G18 G35 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2015-09
New Economics Papers: this item is included in nep-cfn
References: View complete reference list from CitEc
Citations:

Published in Proceedings of the Proceedings of the 18th International Academic Conference, London, Sep 2015, pages 188-202

Downloads: (external link)
https://iises.net/proceedings/18th-international-a ... =27&iid=034&rid=3037 First version, 2015

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:2703037

Access Statistics for this paper

More papers in Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences
Bibliographic data for series maintained by Klara Cermakova ().