S&P rates Kansas City Southern loan BBB-

Standard & Poor's said it assigned a BBB- rating to Kansas City Southern Railway Co.'s proposed $275 million senior secured term loan due Jan. 15, 2017.

The agency also said it assigned a 1 recovery rating, reflecting 90% to 100% expected recovery in a default.

The proposed term loan is part of the company's existing amendment to its senior secured credit facility.

The proceeds will be used to tender for $275 million of its outstanding 8% senior notes due 2015.

The ratings reflect a financial risk profile that, while improving, remains somewhat weaker than those of its peer railroads, S&P said.

The company has substantial capital spending requirements and meaningful exposure to cyclical end markets, such as automotive and manufacturing, the agency said.

The favorable characteristics of the U.S. freight railroad industry and the company's strategically located rail network partly offset these risks, S&P added.

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