Bond insurance seen unlikely on NYC tobacco bonds
New York City's planned sale next week of bonds backed by the national tobacco settlement is unlikely to carry bond insurance, sources involved with the deal said.
Insurance, which would boost the bonds' ratings to triple-A and likely attract a whole new class of investors, was one of the last question marks for the city's planned $700 million offering on Wednesday -- the first such tobacco deal for the fixed income markets.
But bond insurers, whose industry is founded on the goal of never paying a claim, have so far been unable to get comfortable with a type of risk never before seen in the municipal bond market.
Ambac Assurance Corp., for example, said the current legal environment surrounding the tobacco industry presents too much uncertainty for the company, a unit of Ambac Financial Group Inc.
``At this point, there are several legal issues that we haven't come to grips with or resolved internally,'' including the continued legal threats to the industry and possible attacks on the settlement agreement itself, said Howard Pfeffer, senior managing director of public finance at Ambac.