S&P rates Kansas City Southern loan BB-, notes B

Standard & Poor's said it assigned its BB- rating to Kansas City Southern Railway Co.'s proposed new $75 million term loan C due 2013, the recovery rating is 1, indicating expectations of full recovery of principal in the event of payment default.

In addition, a B rating was assigned to the proposed new $165 million notes offering by Kansas City Southern de Mexico S. de RL de CV (previously TFM SA de CV) and other senior unsecured ratings on the company were raised to B from B-, the agency added.

All other ratings, including the B corporate credit rating on Kansas City Southern, were affirmed, the agency said, noting, however, that it revised the outlook to positive from stable, reflecting the potential for a rating upgrade if liquidity, which will be bolstered by refinancing activities under way, continues to improve.

"The ratings reflect Kansas City Southern's highly leveraged capital structure, challenges associated with its integration of KCSM, the Mexican railroad it acquired in April 2005 and limited [albeit improving] liquidity," said S&P credit analyst Lisa Jenkins.

"Offsetting these risks to some extent are the favorable characteristics of the U.S. freight railroad industry and the company's strategically located rail network."

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