Fitch Downgrades Buckeye Tobacco Settlement Financing Authority's 6% 2042 Turbo Term Bonds

CHICAGO--()--Fitch has downgraded the rating assigned to Buckeye Tobacco Settlement Financing Authority, 2007 (Ohio), tobacco settlement asset-backed bonds, 6% series 2007A-2 senior current interest turbo term bonds due June 1, 2042 to 'B+sf' from 'BB+sf'. The Rating Outlook remains Negative.

Key Rating Drivers

The downgrade is the result of a model error detected in Fitch's Tobacco Settlement ABS Breakeven Model (the Model). The Model is utilized in assigning new - and monitoring existing - tobacco settlement ABS ratings.

The model error impacted the breakeven percentage result for a given tranche under a Master Settlement Agreement (MSA) payment change scenario. Specifically, the model error failed to account for model-implied interest shortfalls for senior tranches before applying available cash to the affected junior bonds. This caused an understated breakeven output resulting in a higher implied model-indicated rating for the tranche.

The model error has been corrected and all Fitch-rated tobacco settlement transactions have been reviewed using the corrected model. This rating action results from the discrepancy between the corrected model output relative to the prior rating assigned.

Rating Sensitivities

Fitch runs different declines in MSA payment scenarios when evaluating the rating sensitivity for tobacco settlement ABS. For further discussion of Fitch's sensitivity analysis, please see the related presale report for this transaction.

Additional information is available at 'www.fitchratings.com'.

Applicable criteria available at 'www.fitchratings.com':

--'U.S. Tobacco Settlement ABS Criteria' (July 10, 2013);

--'Global Structured Finance Rating Criteria' (May 24, 2013).

Applicable Criteria and Related Research:

U.S. Tobacco Settlement ABS Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=712358

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826792

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Contacts

Fitch Ratings
Primary Analyst
Steven Stubbs, +1-212-908-0676
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Lauren Tierney, +1-212-908-9168
Director
or
Committee Chairperson
Michael Dean, +1-212-908-0556
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Steven Stubbs, +1-212-908-0676
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Lauren Tierney, +1-212-908-9168
Director
or
Committee Chairperson
Michael Dean, +1-212-908-0556
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com