Moody's rates Kansas City Southern loan Ba2, notes B2

Moody's Investors Service said it raised Kansas City Southern de Mexico, SA de CV's corporate family rating and senior unsecured bond rating to B2 from B3 and assigned a B2 rating to its proposed issue of senior unsecured notes due 2014.

The agency also assigned a Ba2 (LGD2, 22%) rating to the Kansas City Southern Railway Co.'s new senior secured term loan C and revised the loss-given-default assessments assigned to the company's senior secured bank credit facility to LGD2 (22%) from LGD2 (21%), to its senior unsecured bond rating to LGD5 (71%) from LGD4 (69%) and to Kansas City Southern's preferred stock to LGD6 (99%) from LGD6 (100%).

The outlook is stable.

The agency said Kansas City Southern de Mexico's debt ratings were upgraded to reflect management's substantive progress in operating the company and Kansas City Southern Railway as one long-haul railroad emphasizing cross-border activity, as well as better financial flexibility from lower coupon debt and a larger revolving credit facility with a longer maturity.

Metrics for Kansas City Southern de Mexico, including EBIT to interest of 1.7x and retained cash flow to debt of 16%, improved sharply over the past year; financial management improved markedly as the company filed its financial statements on time and without reports of control weakness; and management continues to add flexibility to the financial profile by refinancing high-coupon debt and extending debt maturities and has been focused on managing cash efficiently as well as proposing to extend its revolver, Moody's said.

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