Philip Morris makes tobacco payment, market still leery.

• Position: News & Numbers

As of April, governments in 17 states had issued some $19 billion in tobacco bonds backed by the 1998 Master Settlement between the tobacco industry and the states. Following a judgment in Illinois that nearly forced Philip Morris into bankruptcy and prevented the company from making a $2.6 billion payment, however, several governments are now rethinking their plans to issue tobacco bonds.

Just a day before the scheduled April 15 payment, Madison County Circuit Judge Nicholas Byron reduced the size of the bond that Philip Morris was required to pay in order to appeal a $10.1 billion judgment handed down by the same judge in March. That judgment stemmed from a lawsuit in which smokers alleged that Philip Morris had fraudulently portrayed its light cigarettes as a healthier alternative to regular cigarettes. Philip Morris contended that the original $12 billion appeal bond could force the company into bankruptcy and jeopardize payments under the...