(The Associated Press circulated the following on March 17.)
NEW YORK — Three major credit rating agencies on Monday affirmed the debt ratings of CSX Corp., saying that strong earnings and efficiency should allow the railroad to weather added debt from a recently approved repurchase plan.
CSX on Monday approved a share repurchase of $2.4 billion in its common stock.
Combined with almost $600 million authorized under an existing program, the total amount available for repurchase is $3 billion, or about 15 percent of the company’s market capitalization.
The company also increased its dividend and outlined an earnings growth plan through 2010.
Standard & Poor’s Ratings Services said that while the increased share buyback will somewhat weaken the company’s financial profile, CSX continues to benefit from improving earnings and cash flow despite the slowing economy.
“The significant increase in share repurchases will require incremental debt funding, and is generally viewed as a negative credit event,” Moody’s Investors Service analyst David Berge said. “Nevertheless, Moody’s notes that CSX’s operating performance has continued to improve in recent periods, despite weaker freight volumes, as the benefits of operating initiatives have taken effect.”
Shares jumped $2.02, or 4.1 percent, in afternoon trading, as the broader market began to recover from steep earlier losses.