S&P rates K.C. Southern notes BB-

Standard & Poor's said it assigned a BB- rating to Kansas City Southern Railway Co.'s (B+/developing) $275 million senior unsecured debt due 2015 and a 2 recovery rating. The notes are guaranteed by parent company Kansas City Southern.

Proceeds will be used to repurchase $200 million aggregate principal amount of 9½% notes due 2008, to reduce drawing under a revolving credit facility and for general corporate purposes.

Ratings reflect the company's highly leveraged capital structure, substantial capital spending requirements and challenges associated with its integration of Kansas City Southern de Mexico S de RL de CV, the agency said.

Offsetting these risks to some extent are the favorable characteristics of the U.S. freight railroad industry and the company's strategically located rail network, S&P noted.

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