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Non-Tech : Philip Morris - A Stock For Wealth Or Poverty (MO) -- Ignore unavailable to you. Want to Upgrade?

To: Theo Karantsalis who wrote (4075)	6/30/1999 4:14:00 PM
From: Theo Karantsalis	Read Replies (1) \| Respond to of 6439

Wednesday June 30, 2:26 pm Eastern Time Big Tobacco seen able to handle settlement payout WASHINGTON, June 30 (Reuters) - Despite the unprecedented size of the $206 billion nationwide tobacco settlement, state and local governments counting on the money need not be concerned about Big Tobacco's ability to pay, analysts said. Officials across the United States have already drawn up plans to spend the windfall, proposing everything from anti-smoking programs to balancing shaky budgets. But the sheer size of the settlement, reached last November between 46 states and the largest tobacco companies, caused concern about whether the revenue stream could be counted on for the 25-year life of the pact. Of particular interest was whether the money flows would be reliable enough to back bond issues several state and local governments want to sell, in hopes of converting their annual shares into one large up-front windfall. But analysts meeting this week at a conference on the tobacco settlement said they were confident tobacco manufacturers would remain healthy enough to make good on the agreement. ''I expect revenues in the U.S. to remain sufficiently sound to back the (bonds),'' Martin Feldman, managing director at Salomon Smith Barney, said, adding that tobacco industry sales are ''entirely sustainable.'' David Adelman, a principal at Morgan Stanley Dean Witter, said he had a ''high degree of conviction these payments are going to be made.'' Part of the analysts' optimism stems from the highly attractive operating environment in the cigarette industry. Few other industries benefit from habitual usage and virtually no alternative products, they pointed out. ''The resiliency of cigarette consumption is extraordinary,'' Adelman said. Year-to-date cigarette consumption is down only about 6.5 percent, at the low end of expectations. In future years, Morgan Stanley predicts cigarette consumption will drop even more slowly, at a 1.4-percent annual rate. Despite price hikes that raised the cost of cigarettes by about 45 cents a pack, the number of adults who smoke should remain level at 25 percent, said Salomon's Feldman, whose firm was hired by New York City and Nassau County, N.Y., to underwrite their tobacco-backed bond issues. The landmark settlement agreement even had some positive economic effects on the industry, since it is expected to decrease the companies' overall legal exposure and help quiet anti-smoking forces at the state level, Adelman said. But potentially significant risks remain. Individual smoker claims could become more worrisome after two high-profile losses for Philip Morris Cos(NYSE:MO - news). Juries in California and Oregon awarded the families of smokers large judgments in the cases. And the federal government is expected, near the end of the year, to seek reimbursement from tobacco companies for costs it has incurred to treat sick smokers. Other thorny issues include whether Congress will grant the U.S. Food and Drug Administration regulatory authority over tobacco, and how the development of a gray market for cigarettes in the U.S. could impact major tobacco companies.