MUMBAI (Thomson Financial) - Moody's Investors Service upgraded Kansas City
Southern (KCS) and Kansas City Southern de Mexico S.A. de C.V. (KCSM), saying
the railroad operator has demonstrated ability to improve profitability and
service metrics while managing strong sales growth.
Moody's raised KCS and KCSM's corporate family ratings to 'B1' from 'B2'. At
the same time, it raised the ratings for KCS' subsidiary Kansas City Southern
Railroad's (KCSR) senior notes to 'B2' from 'B3', and has raised the ratings of
KCSM's senior notes to 'B1' from 'B2'. The ratings of KCSR's senior secured
credit facilities have been affirmed at 'Ba2'.
The rating outlook remains stable for all issuers, reflecting Moody's
expectations that sales growth will remain strong through 2008 despite weakness
in the U.S. economy in general, and that the strong pricing environment will
hold up through this period so that yields continue to improve.
Moody's expects that KCS' domestic and Mexican operations will continue to
grow and improve over the near term, allowing credit metrics to improve to
levels appropriate for 'B1' rated companies through 2008, although debt will
likely increase coincidental with a heavy equipment purchase schedule.
However, KSC operates under considerably higher financial leverage when
compared to other railroad competitors, Moody's said, adding that KCSM is highly
sensitive to conditions in the Mexican economy and to Mexican regulation.
TFN.newsdesk@thomson.com
jro
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