S&P cuts Kansas City Southern preferreds

Standard & Poor's said it lowered Kansas City Southern's preferred stock ratings to CCC from B- and placed its BB- corporate credit rating, BB+ senior secured debt rating and B+ senior unsecured debt rating and Kansas City Southern de Mexico SA de CV's BB- corporate credit rating on CreditWatch with negative implications.

S&P said the rating actions follow recent negative developments, including the April 3 announcement of a delayed 2005 10-K report filing and last week's announcement that the special shareholders' meeting held to address dividend payment restrictions had been adjourned indefinitely. The lower preferred stock ratings reflect an increased risk of Kansas City Southern failing to make the next dividend payments on the preferred stock.

The agency said it believes that the failure to provide audited financial statements on a timely basis is an event of default under the credit facility. While Kansas City Southern is likely pursuing a waiver with its lenders, S&P believes that the failure to provide financial statements, coupled with limitations imposed by the company's failure to meet threshold covenant levels under its bond indentures, has hampered the company's access to liquidity.

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