Moody's affirms Tobacco companies

Moody's Investors Service said it affirmed the ratings and maintained the outlooks of companies with tobacco subsidiaries operating in the U.S. market, following the decision by the Florida Supreme Court to review the reversal of the verdict made by Florida's Third District Court of Appeal in the Engle class action case.

Ratings affirmed include Altria's Baa2 for senior unsecured debt, Prime-3 for commercial paper; RJ Reynolds' Ba2 for senior secured debt, B2 for senior unsecured debt; Loews' Baa1 for senior unsecured debt; and British America Tobacco plc and subsidiaries' Baa1 for senior unsecured debt.

Moody's said it believes that the risk of ultimate payment by the companies remains very low and that remarks it made in a special comment on U.S. tobacco litigation risk published on April 29 remain valid. In this comment, Moody's said:

"Moody's believes that the Florida Supreme Court will not take the case, or that if it does take it, it will affirm the Third District Court of Appeal's (DCA) ruling. Besides legal issues found by the appellate court, which include lack of basis for certification and inflammatory remarks made by plaintiffs' attorney during trial, the trial structure would call for approximately 700,000 individual trials (plus appellate reviews) in order to determine who would belong to the class. The Florida court system does not have the capacity to absorb this load, and it is difficult to imagine that the Florida Supreme Court would render a decision that would clog it."

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