S&P assigns mxAA- to Ferromex stock certificates

Standard & Poor's (S&Ps) Ratings Services assigned this week a 'mxAA-' to the first and second issuances of medium-term stock certificates of Mexico's largest railroad company Ferromex for a total of up to 2.1 billion pesos (US$189 million). The issuances are for three and five years respectively. The mxAA- rating for the first stock certificate issue considers that Ferromex has a strong potential to pay the interest and the principal. The minus sign reflects a slightly weaker rating than the maximum category. The rating reflects Ferromex's leading position in Mexico's railroad industry, its strong financial position, its partnership with Union Pacific, one of the main US railroad companies, and the company's free cash flow, which is expected to be positive over the next few years. These strengths are offset slightly by the company's highly concentrated client base, a financially weak parent company (Grupo Mexico), due to the fact some of Grupo Mexico's units have undergone a debt-restructuring plan. The company's fortunes are also closely linked to the performance of the Mexican economy, strong competition from truck transport and a moderately aggressive dividend-payment policy.