Kansas City Southern adjourns indefinitely meeting to amend 4.25% convertible preferreds

New York, March 30 - Kansas City Southern said it adjourned indefinitely the meeting to amend the certificate of designation of its 4.25% redeemable cumulative convertible preferred stock, series C after failing to achieve a quorum.

The company said it will inform holders of record if it sets a time and date for another meeting.

At the meeting, Kansas City Southern was hoping to have permission to pay dividends to preferred shareholders in cash, shares of common stock or any combination.

After preparing its 2005 financial statements, the company found that its consolidated coverage ratio, as defined in the indentures governing The Kansas City Southern Railway Co.'s 7½% senior notes due 2009 and 9½% senior notes due 2008, was less than 2.0 to 1.

The company said this was primarily due to a non-cash charge of $37.8 million in the third quarter of 2005 to recognize additional costs related to occupational and personal injury claims determined as a result of an actuarial study.

Under the terms of the indentures, a ratio of less than 2.0 to 1 restricts the company's ability to incur additional debt and pay cash dividends, according to an 8-K report previously filed with the Securities and Exchange Commission. As a result, the company is currently unable to pay cash dividends on the convertible preferred stock or its 5.125% cumulative convertible perpetual preferred stock, series D.

The meeting was held at 11 a.m. ET on March 30 in Kansas City, Mo.

Preferred shareholders of record as of March 17 were entitled to vote at the meeting.

If the proposed amendment is not approved, no dividends for either series of preferred stock may be paid until the ratio increases. Unpaid dividends will accumulate until they are paid, and Kansas City Southern estimated that the ratio may increase to 2.0 to1 or more by the end of the third quarter of 2006.

The company noted in the 8-K filing that whenever dividends on the preferred stock are in arrears for six consecutive quarters, preferred shareholders will be entitled to vote for the election of two of the authorized directors at the next annual stockholders' meeting and at each subsequent stockholders' meeting until such time as all accumulated dividends are paid or set aside for payment.

Kansas City Southern is a transportation holding company with railroad investments in the United States, Mexico and Panama.

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