Kansas City Southern Railway Company (The) -- Moody's upgrades ratings of KCSR, senior unsecured to (P)Baa3, and KCSM, CFR to Ba1

New York, November 21, 2012 -- Moody's Investors Service has upgraded the ratings of Kansas City Southern ("KCS") and The Kansas City Southern Railway Company ("KCSR"), senior unsecured shelf rating to (P)Baa3 from (P)Ba2. Moody's has also upgraded the ratings of Kansas City Southern de Mexico S.A. de C.V. ("KCSM", a wholly-owned subsidiary of KCS), Corporate Family Rating to Ba1 from Ba2. At the same time, Moody's has assigned a Baa3 rating to KCSR's amended bank credit facility. The ratings for KCS, KCSR and KCSM have stable outlooks.

RATINGS RATIONALE

The ratings upgrade for KCS and its subsidiaries reflect the strengthening credit profiles of both companies evidenced by continuing improvements in the leverage, profitability, and liquidity at these railroads, and our expectations that these companies will be able to sustain strong credit metrics over the near term. The operating ratio (essentially one minus operating margin) at KCS' US operations, which is predominantly represented by the company's US railroad subsidiary KCSR, is expected to remain in the low-70% range over the near term. This ratio compares well to other larger Class I railroads that are rated Baa3 and higher. It should also result in strong operating cash flow that will enable KCS to maintain an aggressive and strategically important network investment program. Although this investment program is expected to result in negative free cash flow during the intermediate term, it should support meaningful improvement in service levels and greater pricing power over the long term.

While the company has grown its revenue by over 10% annually since 2009, KCS has been able to reduce debt at its US operations, and credit metrics have improved accordingly. Leverage (Debt to EBITDA) at the company's US operations is estimated at less than 2.5 times as of September 2012, and EBIT to Interest at over 8 times. These measures map well against other Baa3 rated companies. Operating cash flows have been robust, with Retained Cash Flow to Debt of over 40%. Despite the negative free cash flow resulting from its large investment program (in excess of 30% of revenue) debt levels and leverage at the US operations have remained relatively modest as a result of dividend distributions upstreamed from KCSM.

Although operating results are also strong at KCS' Mexican railroad, KCSM, the overall debt levels at this subsidiary remain somewhat elevated, resulting in ratings at KCSM that lag that of KCSR. Whereas debt at US operations now represents less than 100% of revenue in the US, which is roughly in-line with the Class I railroad average, KCSM's $1.4 billion of total debt represents over 140% of revenue. KCSM's key credit metrics for the last twelve months (LTM) through September 2012 include Debt to EBITDA of 2.7 times and EBIT to Interest of 3.5 times. These levels are appropriate for the Ba1 rating, but lag those of the US operations. Moreover, with higher debt levels relative to its size, we believe that KCSM does not enjoy the same downside protection as will the US operations in the event of a recession. KCSM's ratings also take into account recent distributions that it has made to its shareholder, KCS, and some potential that distributions in the future could keep KCSM's debt at higher levels than those of US operations.

KCSR's amended senior bank credit facilities are rated Baa3. Although this facility is currently secured by substantially all assets of the company's US operations, the terms of the amended facility prescribe a fall-away provision relating to certain rating changes, whereby the collateral is released from security pledges and the facilities effectively become senior unsecured obligations of the company. As these provisions will become effective shortly, Moody's has assigned the ratings of these facilities at the same level as KCSR's senior unsecured ratings.

The stable ratings outlook for KCS and its subsidiaries reflect Moody's expectations that the company's operations will be able to maintain solid operating margins while experiencing slow revenue growth over the near term. Operating cash flow is expected to be strong at both railroads over the next few years, sufficient to support substantial levels of investments in their networks, although we also expect that KCS will continue to use a moderate amount of cash distributed from KCSM, partially to cover a portion of US operations' investments.

The ratings could be raised if KCSR or KCSM can further reduce leverage, while at the same time grow the railroads' revenue base and improve margins. At KCSR, the company would need to demonstrate sustained operating ratios at US operations of below 70% through the business cycle, while maintaining leverage below 2.0 times Debt to EBITDA while substantially growing its revenue base. The ability to consistently generate positive free cash flow while maintaining capital spending of at least 17% of revenue will also be important for a ratings upgrade at KCS and KCSR. Similarly, the ratings of KCSM could be raised if the company could consistently grow its revenue base and maintain operating ratios in the mid-60% range, while reducing leverage to below 2.5 times and achieve EBIT to Interest in excess of 5 times.

Ratings could be lowered if operating conditions were to unexpectedly deteriorate, with operating ratios increasing substantially from current levels and negative free cash flow ensuing despite reductions in capital spending in such a downturn. Ratings could also be lowered if the company undertakes an aggressive shareholder return policy, possibly using cash flow or additional debt to fund such a program. Additionally, KCSM's ratings could be revised lower if they were to face any risk of termination of its concession with the Government of Mexico.

Issuer: Kansas City Southern, Inc

..Upgrades:

....Multiple Seniority Shelf, Upgraded to (P)Ba1 from (P)Ba2

..Withdrawals:

.... Probability of Default Rating, Withdrawn, previously rated Ba1

.... Speculative Grade Liquidity Rating, Withdrawn, previously rated SGL-2

.... Corporate Family Rating, Withdrawn, previously rated Ba1

....Multiple Seniority Shelf, Withdrawn, previously rated LGD5, 89%

Issuer: Kansas City Southern de Mexico, S.A. de C.V. ,

..Upgrades:

.... Corporate Family Rating, Upgraded to Ba1 from Ba2

....Senior Unsecured Regular Bond/Debenture, Upgraded to Ba1 from Ba2

....Senior Secured Bank Credit Facility, Upgraded to Baa3 from Ba1

Issuer: Kansas City Southern Railway Company (The) ,

..Upgrades:

....Senior Unsecured Shelf, Upgraded to (P)Baa3 from (P)Ba2

..Assignments:

....Senior Unsecured Bank Credit Facility, Assigned Baa3

..Withdrawals:

....Senior Unsecured Shelf, Withdrawn, previously rated LGD5, 89%

Issuer: Southern Capital Corporation ,

..Upgrades:

....Senior Secured Equipment Trust, Upgraded to Baa1, Baa1 from Baa2, Baa2

The principal methodology used in rating Kansas City Southern and rated subsidiaries was the Global Freight Railroad Industry Methodology, published March 2009. Other methodologies used include Loss Given Default for Speculative Grade Issuers in the US, Canada, and EMEA, published June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Kansas City Southern operates a Class I railway in the central U.S. (The Kansas City Southern Railway Company) and, through its wholly-owned subsidiary Kansas City Southern de Mexico, S.A. de C.V., owns the concession to operate Mexico's northeastern railroad.

Kansas City Southern operates a Class I railway in the central U.S. (The Kansas City Southern Railway Company) and, through its wholly-owned subsidiary Kansas City Southern de Mexico, S.A. de C.V., owns the concession to operate Mexico's northeastern railroad.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

David Berge VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Michael J. Mulvaney MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.

Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.

This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.