Tobacco Proposals Advance, But Cigarette Company Debt Ratings Unchanged

Source from:  bizjournals.com Friday August 3 08/06/2007

Proposals in Congress that would give the government more authority to regulate tobacco and sharply increase taxes on cigarettes have advanced this week, but not gone far enough to affect the credit ratings of cigarette manufacturers. The U.S. Senate's Health, Education, Labor and Pensions Committee approved legislation that would give the Food and Drug Administration broad authority to regulate the tobacco industry. In addition, legislation to increase federal excise taxes on cigarettes has advanced in both chambers; the House proposal would boost taxes by 45 cents per pack, while the Senate measure seeks a 61-cent increase. But members of Congress are returning home for the August recess, which means final votes on the measures by the full Congress won't happen until after Labor Day, at the soonest. Even if legislation was approved by both chambers, it would still have to be signed by the president. The earliest new taxes could take effect would be 2008. In a statement, Standard & Poor's Rating Services says it's not changing its ratings on debt issued by Winston-Salem-based Reynolds American (NYSE: RAI - News), or New York-based Loews Corp., whose Greensboro-based Lorillard Inc. makes Newport brand cigarettes. If a federal excise tax goes into effect, however, S&P would reduce the volume of cigarette sales and also tobacco company profits. Reynolds American and U.S. Tobacco, a smokeless tobacco maker, would be disproportionately affected by such an increase, S&P said. Enditem