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TEXT-Fitch affirms 2 classes of tobacco-related litigation settlement bonds
February 25, 2013 / 10:06 PM / 4 years ago

TEXT-Fitch affirms 2 classes of tobacco-related litigation settlement bonds

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Feb 25 - Fitch Ratings affirms the ratings of the following litigation
settlement bonds (tobacco related). The classes are affirmed based on the
domestic tobacco industry rating and their ability to withstand cash flow stress
commensurate with that rating.

Litigation Settlement Monetized Fee Trust III, 2001-2
--$43,400,000 certificates affirmed at 'BBBsf', Outlook Stable.

Litigation Settlement Monetized Fee Trust IV, 2002-1
--$70,510,000 certificates affirmed at 'BBBsf', Outlook Stable.

The collateral securing the above transactions consists of notes backed by fee
awards payable to legal firms (participating firms) that served as outside
counsel to U.S. states in their settlement agreement with the domestic tobacco
industry. The fee awards are payable to the participating firms under a fee
payment agreement with the tobacco manufacturers. The fee payment agreements set
forth the amount payable to each state's outside counsel(s). The amounts payable
under the fee agreements were awarded by an arbitration panel and are final,
binding, and non-appealable.

The obligations under the fee payment agreements are several and not joint
obligations of each Original Participating Manufacturer (OPM) and are made
quarterly based on relative market share, with quarterly payments generally
subject to an aggregate national cap of $125 million and an annual aggregate
national cap of $500 million. These caps apply to any amounts awarded by the
arbitration panel to settling states' outside counsel, to outside counsel fees
arising out of a settlement of any class action tobacco case, and to counsel
fees arising out of the resolution of any case pursuant to federal legislation.

KEY RATING DRIVERS

Fitch's rating is based on the credit quality of the bonds, which is based on
the credit quality of the fee awards payable to the participating firms by the
OPMs.

RATING SENSITIVITIES

Since the amounts payable under the fee payment agreements are based on relative
market share, Fitch views this obligation as an industry obligation.
Consequently, the rating of these bonds is capped at Fitch's assessment of the
domestic tobacco industry. In Fitch's opinion, the domestic tobacco industry is
rated 'BBB' on an unsecured basis.


Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'U.S. Tobacco Settlement ABS Criteria' (July 16, 2012);
--'Global Structured Finance Rating Criteria'(June 6, 2012).

Applicable Criteria and Related Research
U.S. Tobacco Settlement ABS Criteria
Global Structured Finance Rating Criteria

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