CHICAGO — The Illinois Railsplitter Tobacco Settlement Authority hopes to sell investors on its $1.46 billion tax-exempt tobacco bond issue early next month by using a more conservative structure than seen on past deals that ensures bondholders are repaid even if cigarette consumption falls annually by 10% in the coming years.

The deal — which will raise about $1.3 billion to pay off a state backlog of fiscal 2010 bills — is set for a Dec. 1 pricing. It’s the first by Illinois to securitize the state’s share of payments under the 1998 Master Settlement Agreement between 46 states and most major tobacco companies. It is the first tobacco bond sale in more than two years from a sector battered by cigarette consumption declines, lawsuits, rising taxes, downgrades, and default warnings.

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