S&P puts Tranz Rail on developing watch

Standard & Poor's put Tranz Rail Finance Ltd on CreditWatch developing including its $74.48 million 7.278% passthrough due 2008 at CCC.

S&P said the action follows the recent offer by RailAmerica Inc. (BB-/WatchNegative) to buy 100% of the equity in Tranz Rail.

RailAmerica intends to offer NZ$0.75 cash for each ordinary share of Tranz Rail, for total consideration of about $90 million. In addition, it will assume or refinance about $135 million of existing indebtedness.

The CreditWatch Developing action reflects the probability that foreseeable events could have a positive or negative impact on Tranz Rail's rating, S&P said. A positive impact is likely if the higher-rated RailAmerica is successful in its bid, and injects adequate liquidity into Tranz Rail. In contrast, if the takeover is not successful, Tranz Rail's rating would continue to face pressure, reflecting its liquidity constraints and uncertainty regarding the extent of support from its bankers.

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