Thursday, July 24, 2014 4:09:38 AM
http://www.nasbo.org/sites/default/files/Master%20Settlement%20Agreement.pdf
http://seekingalpha.com/article/2321645-reynolds-lorillard-and-the-master-settlement-agreement-vs-anti-trust-regulators
The "junk bond" problem for several states mentioned in the SA article is especially troubling. They could lose a ton if those bonds default.
Interesting bit here:
One of the provisions in the MSA is that the Original Participating Manufacturers can reduce their payment based on their market share and cigarette sales volume. The market share was set in 1997. As a company reduces their market share below their percentage in 1997, they are granted a discount on the amount they pay each year. If the volume of cigarettes sold in a particular year is lower than what was sold in 1997, they receive another discount. When this money is paid out to the settling states, there are no stipulations on how the money is spent.
As cigarette sales declined sharper than expected in the years after the MSA, it is in the best interest of the government to encourage acquisitions to increase an Original Participating Manufacturers' cigarette sales. This limits the sales volume discount. There isn't necessarily money lost to the states by having multiple competitors, as each pays a percentage of their market share, but as each has a lower volume of cigarette sales, it decreases the payments.
Seems most logical for gov't (maximum $$) to allow all companies into the agreement to guarantee payment and encourage the big to get bigger to avoid any discounts.
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