Illinois legislators today rejected a proposal to limit the amount of money that tobacco companies such as Altria Group Inc.'s Philip Morris USA unit must deposit to appeal legal verdicts.
Philip Morris has been lobbying to limit the amount as it prepares to appeal a $10.1 billion judgment. The company has said it could not make payments for a separate tobacco industry settlement with the states this month if it has to leave a $12 billion deposit.
Credit-rating companies have raised the concern that Philip Morris may seek bankruptcy protection.
The case may be the most serious threat to Philip Morris since the tobacco industry agreed in 1998 to pay $246 billion to settle health care claims brought by U.S. states, analysts have said. Bonds backed by the tobacco settlement have plunged since Monday, while states such as Missouri and California have scrapped plans to sell more such securities.
Madison County Circuit Judge Nicholas G. Byron ruled March 21 that the company's advertising led smokers to believe that "light" cigarettes were less harmful than standard cigarettes.
Byron gave the company 30 days to file motions appealing the bond, which applies interest to the verdict.
Defendants typically must post bonds to appeal judgments to ensure they will have the money to pay if the plaintiffs prevail. Philip Morris, which hired former Illinois governor James R. Thompson to lead its lobbying, had pushed for a $25 million cap on the amount tobacco companies must deposit.
California, New York and Illinois may shelve plans for billions of dollars of bonds backed by tobacco sales because of the verdict in the Illinois lawsuit. Virginia on Tuesday pulled a $767 million tobacco bond issue sold March 20 off the market after Moody's Investors Service cut the ratings of tobacco bonds.
Attorneys general from other states are considering filing motions to intervene in the Illinois case on Philip Morris's behalf, Washington state Attorney General Christine O. Gregoire said last week.
About 16 other suits related to "light" cigarettes are pending against Philip Morris, R.J. Reynolds Tobacco Holdings Inc. and British American Tobacco PLC's Brown & Williamson.
Fourteen states cap the amount of bond companies have to put up, including Florida, where Philip Morris and other cigarette makers are appealing a $145 billion class-action verdict.
Some states, including Missouri, are considering proposals to limit the deposits.