Moody's: RJ Reynolds view negative

Moody's Investors Service said it affirmed the ratings of RJ Reynolds Tobacco Holdings and changed the outlook to negative from stable due to a recent ruling by a Canadian court ordering payment by a subsidiary of Japan Tobacco of C$1.4 billion in owed taxes, for which RJR might need to indemnify Japan Tobacco in the future, and to the upcoming start of a trial potentially leading to significant damages brought by the U.S. Department of Justice against the industry, including RJ Reynolds Tobacco Co. and Brown & Williamson.

Moody's affirmed RJ Reynolds' guaranteed senior secured debt at Ba2 and its non-guaranteed senior unsecured debt at B2.

Moody's said the first factor driving the outlook change is the increased possibility that RJ Reynolds might ultimately have to make a substantial payment under an indemnity agreement with Japan Tobacco.

The second factor driving the outlook change is the upcoming Sept. 21 start of the trial brought by the Department of Justice against the tobacco industry, including RJ Reynolds Tobacco Co. and Brown & Williamson.

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