(The following story by Mark Davis appeared on The Kansas City Star website on January 5.)
KANSAS CITY, Mo. — Kansas City Southern posted another gain for stockholders Monday, its fourth consecutive rise and the best price owners have seen since November.
Shares rose $1.10, or 5.4 percent, to close Monday at $21.49. In just two trading days of 2009, the stock is up 12.8 percent.
The rail transportation company hadn’t released news to spur the stock jump.
Arthur Hatfield, a managing director for transportation research at Morgan Keegan & Co. in Memphis, Tenn., said the bounce may reflect greater-than-average damage shares had taken recently relative to others in the rail industry.
The two-day gain leaves shares almost $10 short of year-ago levels and at less than half of last July’s peak at $55.
The company recently announced plans to streamline operations and bring work done in Shreveport, La., to its Kansas City headquarters. The shift would create about 130 jobs here.
Kansas City Southern had gotten attention three weeks ago when it tapped credit markets for $190 million at a seemingly staggering 16.5 percent yield for buyers of its new five-year notes. Shares jumped nearly 20 percent the next day.
Hatfield said the pricing was lower than markets had estimated. Admittedly, there were few similar bond offerings to go by, but he said expectations were for closer to 18 percent financing.
Kansas City Southern used the money essentially to refinance debts coming due early this year.
It was a relief that the deal had gotten done, given the turmoil in credit markets.
“That was one of the key things,” said Bill Galligan, a Kansas City Southern spokesman.
Galligan said investor concerns about the need to refinance began to surface last October. Although the company is paying a high rate, he said, investors no longer face the refinancing uncertainty.
Hatfield said Kansas City Southern had no other significant debt to refinance through the rest of the year.
Nor will the company necessarily have to pay the high interest rate for the next five years.
Kansas City Southern’s public filings said it can redeem up to 35 percent of the notes within the first two years from proceeds of any equity offering.
It also could redeem the notes in the first three years, albeit at a premium price, or at any time after that at prices set out in the filing.