Moody's ups Kansas City Southern view to stable, rates note B3

Moody's Investors Service said it assigned a B3 rating to Kansas City Southern de Mexico SA de CV's senior unsecured notes due 2013 and changed the outlook to stable from negative for Kansas City Southern Railway Co. and Kansas City Southern.

Kansas City Southern de Mexico's debt level will not change because the proceeds of the new notes will pay for the 10¼% notes tendered under the company's current tender offer, under which 97% of the notes have been tendered.

The agency said Kansas City Southern de Mexico is highly leveraged compared with other railroad competitors, is highly sensitive to conditions in the Mexican economy and to Mexican regulation and has significant ongoing capital spending requirements, especially for locomotives, which will likely limit sustained improvement in credit metrics.

The company operates a geographically attractive railway concession in Mexico and has shown strong recent improvement in operating performance, Moody's noted, and issuing the 2013 notes at this time will ease the near-term refinancing risk considerably, particularly since a condition of the company's bank facility requires the outstanding 10¼% notes to be refinanced in March at the latest.

Moody's noted that the new notes will not be guaranteed by Kansas City Southern Railway Co. or Kansas City Southern, the ultimate parent.

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