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Fitch Affirms 2 Classes of Tobacco-Related Litigation Settlement Bonds

February 28, 2014

Fitch Ratings affirms the ratings of the following litigation settlement bonds (tobacco related).

The classes are affirmed based on the domestic tobacco industry rating and their ability to withstand cash flow stress commensurate with that rating.

Litigation Settlement Monetized Fee Trust III, 2001-2

--$43,400,000 certificates affirmed at 'BBBsf', Outlook Stable;

Litigation Settlement Monetized Fee Trust IV, 2002-1

--$70,510,000 certificates affirmed at 'BBBsf', Outlook Stable.

Key Rating Drivers:

The collateral securing the above transactions consists of notes backed by fee awards payable to legal firms (participating firms) that served as outside counsel to U.S. states in their settlement agreement with the domestic tobacco industry. The fee awards are payable to the participating firms under a fee payment agreement with the tobacco manufacturers. The fee payment agreements set forth the amount payable to each state's outside counsel(s). The amounts payable under the fee agreements were awarded by an arbitration panel and are final, binding, and non-appealable.

The obligations under the fee payment agreements are several and not joint obligations of each Original Participating Manufacturer (OPM) and are made quarterly based on relative market share, with quarterly payments generally subject to an aggregate national cap of $125 million and an annual aggregate national cap of $500 million. These caps apply to any amounts awarded by the arbitration panel to settling states' outside counsel, to outside counsel fees arising out of a settlement of any class action tobacco case, and to counsel fees arising out of the resolution of any case pursuant to federal legislation.

Rating Sensitivities:

Fitch's rating is based on the credit quality of the bonds, which is based on the credit quality of the fee awards payable to the participating firms by the OPMs. Since the amounts payable under the fee payment agreements are based on relative market share, Fitch views this obligation as an industry obligation. Consequently, the rating of these bonds is capped at Fitch's assessment of the domestic tobacco industry. In Fitch's opinion, the domestic tobacco industry is rated 'BBB' on an unsecured basis. The ratings are sensitive to changes in the assessment of the credit quality of the industry as any shift would affect the ratings of these bonds.

Additional information is available at 'fitchratings.com'.

Applicable Criteria and Related Research:

--'U.S. Tobacco Settlement ABS Criteria' (July 2013);

--'Global Structured Finance Rating Criteria'(May 2013).

Applicable Criteria and Related Research:

U.S. Tobacco Settlement ABS Criteria

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=712358

Global Structured Finance Rating Criteria

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://fitchratings.com/gws/en/disclosure/ solicitation?pr_id=820541

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