S&P rates Kansas City Southern notes BBB-

Standard & Poor’s said it assigned a BBB- rating to Kansas City Southern Railway Co.’s senior unsecured notes.

The notes are guaranteed by the company’s parent, Kansas City Southern.

The proceeds will be used to repay the company’s outstanding commercial paper, for share repurchases by Kansas City Southern and for general corporate purposes, S&P said.

The ratings reflect the favorable fundamentals of the North American freight railroad industry, given the limited competition from alternate modes of commercial-freight transport for certain commodities, formidable barriers to entry and moderate cyclicality, the agency said.

The ratings also consider the company’s solid competitive position and good operating efficiency, S&P said.

Despite headwinds from declining fuel-surcharge revenue, the weak Mexican peso and the volatile climate for energy-related products, the company’s revenues and earnings are expected continue benefitting from the positive pricing environment and management’s ongoing focus on efficiency improvements, the agency said.

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