Altria Slides on Slew of Bad News

Meanwhile, Moody's cut its rating on Altria, citing the company's potential inability to pay the bond. Its rating is now three notches above junk status.

Nonetheless, some equity analysts believe that Altria might be successful in lowering the bond payment. "I think it's highly likely that the bond amount will be reduced, given what happened in the Engle case," said an analyst who requested anonymity. The analyst said the bond could be reduced to as little as $100 million.

In the Engle class-action lawsuit, a Florida jury ordered the tobacco industry to pay sick smokers $145 billion in punitive damages, but the plaintiffs shelled out just $600 million to appeal the case. The circumstances in that situation were slightly different, though, because Florida Governor Jeb Bush had signed a bond-cap legislation into law some 10 weeks before the Engle jury determined its punitive damage award. Philip Morris paid that $100 million bond and then made a nonrefundable $500 million payment in return for class representative Stanley Rosenblatt's agreeing not to appeal the constitutionality of the $100 million bond cap.

Still, Martin Feldman, an analyst at Merrill Lynch, said a smaller yet nonrefundable payment remains an option. He also said it is also possible that Philip Morris USA will file a successful appeal to the Supreme Court or that bonding-cap legislation will be passed and retroactively applied, although he noted that this last option is somewhat questionable.

Analysts also note that the tobacco industry has a powerful lobbying force behind it. Some 49 states -- all but Illinois where the case is being tried -- have indicated that if the issue isn't resolved by April 15, they will intervene to seek a smaller bonding requirement. The states are concerned because Altria has said it wouldn't be able to pay the $2.6 billion it owes the states next month if the bond were upheld.