Moody's upgrades CSX

Moody's Investors Service said it upgraded CSX Corp.’s issuer rating, convertible senior unsecured bonds and regular senior unsecured bonds to Baa1 from Baa2 and CSX Transportation, Inc.’s senior secured equipment trust to Aa3 from A1, senior secured bonds to Aa3 from A1 and senior unsecured bonds to Baa1 from Baa2. The outlook remains stable.

The upgrade reflects Moody's assessment that the risk of further declines in the company's domestic coal business has subsided, with only a limited number of coal-fired power plants in CSX's network remaining that are expected to close as a result of more stringent environmental legislation. Taken together with a favorable outlook for the company's merchandise and intermodal segments, Moody's expects CSX to generate funds from operations of more than $3 billion in 2015 despite an adverse impact of the expiration of bonus depreciation for federal income tax purposes.

The stable outlook is predicated on Moody's expectation that an uptick in U.S. GDP growth in 2015 will drive broad-based demand in CSX's merchandise segment while its intermodal segment should grow somewhat faster with continuing migration of freight from highways to CSX's rail network.

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