Moody's cuts Kansas City Southern

Moody's Investors Service said it downgraded the ratings of Kansas City Southern Railway, and in a related action, Moody's assigned a Ba3 rating to the company's new $150 million secured term loan B and the company's amended $100 million secured revolving credit agreement.

Ratings downgraded also include Kansas City Southern Railway's senior implied to B1 from Ba3 and senior unsecured debt to B2 from Ba3, as well as Kansas City Southern Industries' convertible perpetual preferreds to Caa1 from B3.

The outlook is negative.

Moody's said the downgrade considers the continued high debt of Kansas City Southern Railway and the weak coverage and cash flow leverage metrics, the company's weak operating ratio relative to other major railroads, and its high operating cost structure that limits meaningful upside potential even as the industrial economy improves.

The ratings also consider the company's geographically attractive rail property, significant asset protection for its secured debt, and the relatively high level of balance sheet cash at present.

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