As reported late yesterday, the Illinois judge reduced the $12 billion appeal bond requirements for Philip Morris and that company in turn has now been able to make its payments to the states. So is the crisis entirely over? Some say, not really, as the confidence of investors has been shaken. Here, for instance is a quote from the middle of a NY Times story today:
Shares of the company's parent, the Altria Group, tumbled and credit agencies downgraded the ratings of bonds issued by Altria, Philip Morris and Altria's other subsidiaries, like Kraft Foods. In addition, the market for state-issued bonds backed by lawsuit settlement payments from Philip Morris and other cigarette makers wobbled. Faced by the fallout from the Illinois case, several states also pulled back temporarily on plans to raise money by issuing such bonds. Martin Feldman, a tobacco industry analyst with Merrill Lynch, said that yesterday's decision removed the immediate cloud hanging over Philip Morris. "The most significant aspect of the reduced bond is that it removes the specter" of a Chapter 11 filing, Mr. Feldman said. He noted, however, that the new reduced pledge was the largest ever required of a tobacco company and that other cigarette makers could soon face claims similar to the one that yielded the huge judgment against Philip Morris. "It's a temporary reprieve," he said.A brief Washington Post story may be accessed here. Finally, you can access the order of the Illinois court order here, via Findlaw.
Updated 4/16/03. This morning's Indianapolis Star reports that Philip Morris did indeed meet Tuesday's deadline for this year's $52 million payment to Indiana. Access the entire story here.
And a Fortune article, dated 4/14/03 but just published today (4/16/03), gives a good, in-depth analysis of Altria, headed: "Hit by cut-rate competitors, taxes, and most of all, litigation, the company that owns Philip Morris faces its worst crisis in years." This quote, written the day before the Illinois judge lowered the appeal bond, thus averting the current crisis, shows what may still be ahead for Philip Morris:
However Philip Morris resolves its Madison County problem, there are plenty more fights to come. Two more consumer fraud class actions have been certified in Massachusetts and Florida. Two additional personal injury cases are slated for trial in California this year. And there are ten plaintiffs' verdicts that Philip Morris is appealing. One is the Engle case, which awarded $145 billion in damages to Florida smokers three years ago; Philip Morris is on the hook for $74 billion. Every Wednesday at 10:30 a.m., the folks on Altria's 22nd floor wait in hope that a Florida appellate court has reversed the verdict or sent the case back to trial court.Access the Fortune article here. Posted by Marcia Oddi at April 15, 2003 07:17 PM