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Non-Tech : Railroad industry: Freight railroads/rail supply companies
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To: Randall E. Gann who wrote (4)9/6/1998 11:54:00 AM
From: Tom Murray  Read Replies (2) of 13
 
I don't know all the factors behind the recent slide in KSU's price, but I talked a few days ago with their Director of Investor Relations and he told me that there was a rumor going around to the effect that the IRS had turned thumbs down on the tax-free spinoff of KSU's financial services unit. Not true, he said. KSU has continued to furnish information to the IRS concerning the proposal, and the IRS has not yet made a ruling. He made the point -- which chairman Landon Rowland had also made at the 2Q earnings conference -- that management is committed to separating the financial and rail units. As for the rail unit, I think the Mexico investment (about 40% of Transportacion Ferrovaria Mexicana, which operates between Laredo and Mexico City) is both the biggest positive and the biggest negative for the long term. The potential volume of business is a positive, but the debt load is a negative. Once the financial spinoff has been accomplished, KSU (which will then be a "pure" transportation company) proposes to do an equity offering in order to reduce the debt-equity ratio. The basic problem with the stock today (from the market's perspective) is uncertainty. Tom Murray
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