(The following story by John D. Boyd appeared on The Journal of Commerce website on March 24, 2009.)
WASHINGTON, D.C. — Kansas City Southern is issuing more debt for its Mexican operations and may issue stock for its U.S.-based company, to boost liquidity as traffic and revenue fall.
In filings with the Securities and Exchange Commission, the company said U.S. carload and intermodal volume at the Kansas City Southern Railway U.S. operations fell 5.9 percent from a year earlier through March 14. Traffic at Kansas City Southern de Mexico plunged 25.9 percent in that time.
It also said U.S.-denominated revenues for both KCSR and KCSM are expected to decline “at a rate greater than these percentage volume decreases due to product mix, shorter length of haul and reduced fuel surcharge revenue.”
And KCSM sales “have also been negatively affected by the continued devaluation of the Mexican peso against the U.S. dollar,” it said.
Although the first quarter is the weakest for the freight rail system and it is already cutting costs, KCS said it will issue “$200 million of unsecured debt by KCSM in a private offering.”
It will also launch “a program giving KCS the option of issuing equity of up to an aggregate amount of $75 million from time to time at its discretion, including through a public offering.”
Those various cuts and liquidity steps, it said, should “provide KCS sufficient liquidity to effectively manage its operations for at least the next two years,” even if the economy does not get better quickly.