S&P rates new CSX notes BBB

Standard & Poor's said it assigned its BBB rating to CSX Corp.'s $200 million of 2.75% notes due February 2006 and $200 million of 5.30% notes due February 2014.

S&P said the ratings reflect CSX Corp.'s (BBB/Stable/A-2) strong competitive position as one of the two large eastern U.S. railroads and the better-than-average business risk profile of the U.S. freight railroad industry.

These factors partly offset a subpar financial profile, which reflects the substantial debt burden CSX incurred in 1997 to acquire 42% of Conrail Inc., its subsequent post merger integration problems, and recent operating inefficiencies.

Ratings incorporate an expectation that management's initiatives to improve operating performance will lead to improved financial results over the near to intermediate term, S&P said.

The company's credit measures remain weak for the rating. Funds from operations to debt (adjusted for operating leases) is in the mid-teen percentage area and debt to total capital is in the mid-to-upper 50% area.

S&P said CSX management is expected to remain committed to improving credit protection measures, which are likely to remain subpar in the near term but improve over time to levels more appropriate for the rating (e.g., funds from operations to adjusted debt in the 25%-30% area and debt to total capital (adjusted for operating leases) in the 50% area.

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