OREANDA-NEWS. Fitch Ratings has published an exposure draft with respect to its criteria for rating U.S. Tobacco Settlement ABS. Fitch invites feedback on the proposals during the consultation period that will end on July 22, 2015. The agency will continue to apply its current criteria until the finalization of the revised criteria which Fitch expects to publish in July 2015 following the review of comments received during the consultation period.

The main proposals upon which feedback is sought are:

--Application of the most recent MSA payment received as the starting point on Fitch's cash flow model.

The exposure draft discloses the application of the most recent MSA payment on Fitch's cash flow mode. The starting point in Fitch's break-even analysis is the most recently received MSA payment amount net of any one-time cash receipts. However, there may be instances where Fitch will adjust the starting payment amount to account for volatility. Such instances will be described in the related presale report.

--Revising the rating floor to 'CCCsf' from 'B-sf'.

Given the long tenor of most tobacco bonds, the upside potential from potential higher inflation rates or further NPM-disputed amounts and other factors, Fitch will apply a rating floor of 'CCCsf', unless it determines that default of some kind appears 'probable' ('CCsf') or 'imminent or inevitable' ('Csf') due to a high break-even rate that is unlikely to be resolved in the remaining time to maturity.

Ratings Impact:

Fitch expects about 64 notes to be downgraded from the changes proposed above.