Fitch rates Kansas City Southern de Mexico note B+

Fitch Ratings said it assigned a B+ foreign-currency rating with a RR4 recovery rating to the $175 million 7 5/8% senior notes due 2013 to be issued by Kansas City Southern de Mexico, SA de CV and affirmed the B+/RR4 ratings on the company's $178 million 12½% senior notes due 2012 and $460 million 9 3/8% senior notes due 2012.

The outlook is stable.

The proceeds of the proposed new issuance will be used to pay off the company's outstanding $150 million 10¼% notes due 2007 and other existing debt.

The agency said the ratings are supported by the company's solid business position as a leading provider of railway transportation services in Mexico with a diversified revenue base consisting of five main industrial sectors.

Although operating earnings have improved in 2006, the ratings continue to reflect Kansas City Southern de Mexico's weak financial profile due to its high leverage and tight liquidity, Moody's said. Over the past several years, the company has operated in a challenging environment characterized by fierce competition, higher fuel costs, a depreciating Mexican peso versus the dollar and a general shift in manufacturing to China from several countries including Mexico. At Sept. 30, the company had $1.4 billion in total debt and a total debt-to-EBITDAR ratio of 4.4x.

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