The New York State Tobacco Settlement Financing Corp. in late June plans to refinance $975 million of tobacco revenue bonds backed by the state's appropriation pledge.

The corporation had $3.11 billion of outstanding tobacco bonds as of Oct. 31, 2010, according to the agency's fiscal 2010 audit.

The TSFC credit carries AA-minus ratings from Standard & Poor's and Fitch Ratings, thanks to New York's promise to appropriate funds to the corporation each year to pay for debt service costs.

The appropriations come from the yearly settlement payments New York receives from tobacco companies as part of a nationwide 1998 multi-state agreement between state governments and cigarette manufacturers.

Richard Larkin, senior vice president at Herbert J. Sims & Co., said while it's a difficult time to refinance "pure" tobacco bonds secured solely from settlement payments, states that placed their appropriation pledges on tobacco bonds could realize refinancing savings.

"Trying to refund pure tobacco bonds in this environment would probably be impossible," Larkin said.

The TSFC's board is scheduled to vote Tuesday on the refinancing, according to the meeting's agenda, which does not include the size of the refunding, the bonds that will be refinanced, or the underwriter.

The agency declined to comment on the refinancing until after Tuesday's board meeting. The New York State Comptroller's forward issuance calendar lists a $975 million TSFC refinancing deal for the week of June 27.

Tobacco settlement payments are based on cigarette shipments.

Under the 1998 agreement, New York and California each receive the largest percentage of the annual payments to the states — 12.76%.

New York received $410.1 million in settlement revenue in fiscal 2010.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.