Kansas City Southern expects liquidity to hit $250 million by Sept. 30

By Jennifer Lanning Drey

Portland, Ore., Sept. 2 - Kansas City Southern projects it will end the third quarter with about $250 million of liquidity and believes its liquidity position will continue to improve through the balance of the year, its chief financial officer Michael Upchurch said Thursday at the Hodges Capital Management Investment Forum in Dallas.

The company had $209 million of liquidity at June 30.

Kansas City Southern boosted its liquidity by closing on a new $100 million revolving credit facility for Kansas City Southern de Mexico SA de CV earlier this week, he noted.

The company also expects to deliver positive free cash flow of roughly $150 million for the full year, Upchurch said.

Kansas City Southern has recently been using its free cash flow to delever the balance sheet.

During the presentation, the CFO also highlighted the fact that the company has been busy with financing activities in 2010, as it restructured the balance sheet and lowered its debt.

Specifically, he mentioned that the company used the proceeds from an April stock sale, along with $100 million of excess cash, to reduce its debt by $337 million at the end of the second quarter. The pro forma figure includes outstanding notes in Mexico that were recently called, he said.

Upchurch noted that the company's actions to date have lead to improved ratings and upgraded outlooks from the ratings agencies.

"We continue to believe that if we execute this plan, we'll continue to improve our overall credit profile," he said.

Upchurch also said that Kansas City Southern expects its leverage ratio to continue to be reduced over the next few quarters.

Based in Kansas City, Mo., Kansas City Southern provides rail transportation services.

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