Moody's ups Tranz Rail pass throughs to B2

Moody's Investors Service said it has upgraded to B2 from Caa1 the rating of Tranz Rail Finance Ltd.'s pass through certificates, Series 1996, backed by Tranz Rail Ltd (the wholly-owned subsidiary of Tranz Rail Holdings Ltd).

The outlook is positive.

The action follows confirmation of Toll Holdings' takeover of Tranz Rail Holdings.

As indicated, the rating upgrade reflects Toll Holdings' 84% takeover of Tranz Rail Holdings. Toll Holdings is further seeking to acquire the remaining 16% with an offer on the New Zealand Stock Exchange and which has been extended to Dec. 22.

Moody's said Tranz Rail Holdings is expected to subsequently de-list from the exchange and become a 100% owned subsidiary of Toll Holdings. While Toll Holdings has not guaranteed Tranz Rail Holdings' obligations, its financial position is stronger, and Moody's said it expects Toll Holdings to provide financial support to its new subsidiary.

The rating upgrade further considers Tranz Rail Holdings' improved operating performance for fiscal year 2003. Its liquidity position has strengthened with access to a renegotiated bank facility until June 2004, the agency said.

The rating has been withdrawn because Moody's lacks sufficient information to maintain a rating. It is expected that Toll will privatize Tranz Rail in the near future.

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