Philip Morris USA (PM USA) today made its annual Master Settlement Agreement
(MSA) payment of approximately $3.1 billion. The payment reflects a $483
million credit that PM USA received pursuant to a settlement of the
non-participating manufacturer (NPM) adjustment disputes for 2003-2012 that it
and other participating manufacturers reached in December with 17 states, the
District of Columbia and Puerto Rico. Since then, one other state joined the
settlement, bringing the total number of signatory jurisdictions to 20.
A panel of three retired federal judges presiding over the pending NPM
adjustment arbitration entered a stipulated award on March 12, 2013, directing
that the December settlement be implemented.
“We believe the settlement resolves the NPM adjustment disputes on financial
terms that are fair to the parties and in a way that we believe will lead to a
better method of resolving these issues in the future,” said Denise Keane,
Altria Group's executive vice president and general counsel, speaking on
behalf of PM USA. “We hope other states will see the benefits of the
settlement and consider joining.”
The settlement provides the signatory states a release of approximately $2.0
billion from the disputed payments account (DPA), which represents their share
of over $4.7 billion that is currently in the DPA. For the signatory states,
the settlement is net cash positive and also removes the risk of substantial
reductions of MSA revenues in future years related to the 2003-2012 disputes.
Last week, courts in two states denied preliminary injunctions against
provisions of the panel's award that had been sought by two of the states that
have not joined the settlement (non-signatory states). In addition, a number
of non-signatory states have brought actions to vacate or modify the panel's
award. Those actions remain pending. Additional non-signatory states may
pursue similar actions. While PM USA intends to oppose these actions
vigorously, no assurance can be given that these actions will be resolved in a
manner favorable to PM USA or as to what remedy might be ordered.
To date, Alabama, Arizona, Arkansas, California, District of Columbia,
Georgia, Kansas, Louisiana, Michigan, Nebraska, Nevada, New Hampshire, New
Jersey, North Carolina, Oklahoma, Puerto Rico, Tennessee, Virginia, West
Virginia and Wyoming have agreed to join the NPM adjustment settlement.
Today's MSA payment also includes approximately $203 million that PM USA
disputes it owes as a result of the 2010 NPM adjustment. As permitted by the
MSA, PM USA deposited the disputed funds into the DPA. As part of the DPA
releases described above, the signatory states' shares of the disputed amount
for 2010 is being released to them from the DPA in connection with the
settlement.
PM USA has paid more than $62 billion to the states under the tobacco
settlement agreements signed in 1997 and 1998.
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