29 May 2008

Timing Proved Crucial for Record W.Va. Bond Deal

West Virginia issued bonds last year in exchange for $911 million in up-front cash. It promised the buyers of those bonds future annual proceeds from its multibillion-dollar settlement with major U.S. cigarette makers, whom it had sued in the 1990s to recoup tobacco-related health care costs.

As The Charleston Gazette reports, market analysts have lauded state officials for their sense of timing.

"As it turned out, it was also the last major issue of taxable tobacco settlement bonds on Wall Street before the bond market took a severe downturn, driven by the subprime mortgage crisis," the article said, citing Citigroup advisor Paul Creedon.

Subsequent declines in cigarette sales would have also meant diminshed returns for the state from its litigation settlement, had it not diverted them to bondholders in exchange for the up-front cash.

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