Some background first:
After the tobacco settlements, it was written that those companies who made tobacco products (Phillip Morris, RJ Reynolds ect) would pay the states billions to cover the expense of care and punitive damages.
Now, these states who would recieve these monies over time, began to issue tobacco bonds, and planned to repay the debt holders with the monies they would recieve from tobacco. This way, the states raised money now, and would repay the debt and interest of the debt from monies recieved later.
Here it starts to get fun:
Recently Virginia was offering 7% tax free tobacco settlement bonds. The offer had already been allocated (ie. the buyers had made purchase) but it hadn't hit the street yet. The bonds were rated AA+/AA above junk bond status but below the AAA government guarentee rating. The 12 billion dollars required of Philip Morris to put in escrow, in essence to make sure the monies would be around for years in order to float the debt, was way too steep and Phillip Morris (ticker:MO) said it would put them in jeapordy and might have to declare bankruptcy (most likely a threat tactic).
Well, the rating on those VA bonds dropped over night (this was 1 week ago) and the bond deal was scraped.
Suddenly, we have the states scrambling to find ways to 'help' the tobacco companies, for fear of losing potential billions of dollars. This after all the time and money spent in suing them to begin with.
Well, that was a long winded explanation, but I just love it!
Reminds me of another quick story. In essence a guy bought expensive cigars and insured them. After smoking them all he made an insurance claim that they were each lost in a small fire. He won in court! After depositing the check, the insurance company turned around and sued him for individual acts of arson. They won.