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4/20/2009



Rail News: Rail Industry Trends

Fitch affirms CSX's debt rating at BBB-; outlook for Class I is 'stable'


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Fitch Ratings recently affirmed its ratings of BBB- for about $7.3 billion in debt and $1.25 billion in an unsecured revolving credit facility for CSX Corp. Fitch’s rating outlook for the Class I is “stable.”

The ratings reflect CSX’s “significant financial flexibility and liquidity position,” even though the railroad’s likely to encounter near-term pressure on free cash flow from softness in transportation demand because of the sluggish economy, Fitch said in a note issued Friday.

Although this year’s traffic volumes likely will be down “significantly” from 2008’s levels, the rate of decline will moderate as the year progresses — particularly during the fourth quarter, when CSX “laps the heavy volume declines seen late lasts year,” Fitch said.

Unit revenue is expected to be “significantly” lower this year compared with 2008’s total, but core pricing — excluding fuel surcharges and mix effects — will rise, Fitch analysts believe.

Over the near to medium term, Fitch expects CSX’s ratings to remain stable and the company’s credit profile to remain in line with the BBB- ratings. But CSX’s rating outlook could be revised to “negative” if there is “an unanticipated return to heavy share repurchase activity in the current weak market environment,” particularly if debt is refinanced, Fitch noted.

BBB ratings indicate good credit quality, with the expectations of default as currently low. “The capacity for repayment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity,” according to Fitch’s Web site.

— By Desiree J. Hanford. A Chicago-based free-lance writer, Hanford covered the equities market, including transportation, for Dow Jones & Co. for 10 years.


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