Puerto Rico Sets Sights on Tobacco Bonds in Long-Shot Money Grab
- Securities backed by cigarette cash included in moratorium law
- Some Children's Trust debt still has investment grade ratings
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Most tobacco bonds are destined for default, including those issued by Puerto Rico. Investors just never thought it could come this way.
Included in the commonwealth’s debt moratorium law passed this month: Children’s Trust, a not-for-profit entity created to issue debt backed by legal-settlement money that U.S. states and localities receive from cigarette companies. Its presence is puzzling in that unlike almost every other Puerto Rican bond, some of the tobacco securities still carry investment-grade ratings because the cash that pays investors is deemed out of the government’s reach.