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Fitch Lwrs Golden State Tobacco Securitization Corp., CA to 'BBB'; Rating Watch Continues
BUSINESS WIRE ^ | January 12, 2004

Posted on 01/12/2004 7:22:40 PM PST by calcowgirl

NEW YORK--(BUSINESS WIRE)--Jan. 12, 2004--Fitch Ratings lowers the rating assigned to Golden State Tobacco Corporation's enhanced tobacco settlement asset-backed bonds, series 2003 B to 'BBB' from 'A-'. Certain of the maturities are insured; for these maturities, the action pertains to the underlying ratings. The rating remains on Rating Watch Negative.

While pledged tobacco settlement revenues are the expected source of payment, ultimate security and the rating are based on the covenant that the director of finance will request the governor to include in the annual state budget act an appropriation for the full amount of debt service and operating expenses due on the bonds in the next fiscal year. Consequently, the rating on these bonds reflects the state's credit.

The rating on California's general obligation bonds was lowered to 'BBB' from 'A' on Dec. 18, 2003, due to a widening budget gap, the intention to increase the amount of deficit funding and the magnitude of measures necessary to restore balance. The rating remains on Rating Watch Negative to reflect the potential for further financial deterioration.

TOPICS: Business/Economy; Government; News/Current Events; US: California
KEYWORDS: bondrating; bonds; calgov2002; fitch; pufflist; tobacco

1 posted on 01/12/2004 7:22:41 PM PST by calcowgirl
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To: calcowgirl
This is a simplistic explanation. Here's more.

The settlement was reach based on the industry's appraisal of it's net revenues in the California market. Those appraisals were reached based on the covenant that California would not poison the market with usurious taxes.

Today, the California legislature is considering a large increase in sin taxes and Schwarzenegger is siphoning a fair percentage of the existing tax away from its intended purpose to close the $22B structural deficit the state faces by July 2005.

Both moves make the bond market very nervous.

2 posted on 01/12/2004 8:02:09 PM PST by Amerigomag
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To: calcowgirl; *calgov2002; NormsRevenge; Grampa Dave; SierraWasp
3 posted on 01/12/2004 8:06:22 PM PST by Ernest_at_the_Beach (Davis is now out of Arnoold's Office , Bout Time!!!!)
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To: Ernest_at_the_Beach; tubebender; Carry_Okie; marsh2; NormsRevenge; dalereed; ScottinSacto; ...
"to reflect the potential for further financial deterioration."

I'm really wondering how attractive the unprecedented bondage is going to be to bond investors even at "Junk Bond" interest rates of an extreme nature. With interest rates generally required to rise with an improving economy, bonds become severely unattractive to investors and sellers will have to discount for anticipated interest rates!!! (yes, that applies to government bond trading too)

To taxpayers, this will amount to a tax increase anyway, even if the economy improves as the interest cost on this debt service will be enormous!!! So how does this solve anything. We'll still be stuck with enormous government employee Union Contracts and illegally overpriced energy contracts that should be voided and re-negotiated!!!

The damage by Demicrats and their dorky Duffus lives on in the long, long term. Ok, we've got our Repellican Governor, now we need the catharsis of confronting bankruptcy or revised contracts, in lieu thereof.

4 posted on 01/12/2004 8:39:15 PM PST by SierraWasp (GovernMental EnvironMentalism has become totally counterproductive and everybody knows it !!!)
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To: calcowgirl
5 posted on 01/12/2004 8:46:48 PM PST by NormsRevenge (Semper Fi Mac ....... Become a Monthly at FR.......
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To: SierraWasp
Maybe Arnold can get Warren Buffet to co-sign those notes...
6 posted on 01/12/2004 8:49:51 PM PST by tubebender (Don't believe anything you hear and only half of what you see...)
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To: tubebender
He's the only one that wants to buy those loser bonds!!! He's the only one that could afford to hold 'em to maturity!!!

Don't nobody buy these dogs inside a bond fund. You have no guarantee of return of principal by waiting till maturity, cause there's no maturity for bond fund shares!!!

7 posted on 01/12/2004 8:57:07 PM PST by SierraWasp (GovernMental EnvironMentalism has become totally counterproductive and everybody knows it !!!)
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To: Amerigomag
Thanks for the added info.
8 posted on 01/12/2004 9:24:43 PM PST by calcowgirl (No on Propositions 55, 56, 57, 58)
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To: calcowgirl; *puff_list; bc2; The Mayor; qam1; VermiciousKnid; Madame Dufarge; SheLion; Gabz; ...
Another reason is that the Master Settlement Agreement attempt at extortion was a failure. Small tobacco companies who weren't party to the suit or the subsequent settlement are biting deep into the market share of the big tobacco companies, so the settlement proceeds aren't nearly as much as the states' Attorneys' General greedy eyes guestimated. Expect another round of suits like the one against Poison Inc to start as they start further closing the door on free trade and competition.
9 posted on 01/18/2004 10:50:15 AM PST by lockjaw02 ("The crap left by anti-smoking socialists is like the garbage. It has to be removed daily."-lockjaw)
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To: lockjaw02; calcowgirl
10 posted on 01/18/2004 11:13:08 AM PST by The Mayor (The more you look forward to heaven, the less you'll desire of earth.)
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To: The Mayor; calcowgirl; lockjaw02
11 posted on 01/18/2004 12:56:01 PM PST by Gabz (smoke gnatzies - small minds buzzing in your business -swat'em)
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