U.S. Transportation Secretary Ray LaHood has announced a $54.6 million loan to Kansas City Southern Railway Company (KCSR) for the purchase of 30 new General Electric ES44AC locomotives.
These diesel-electric locomotives, built in Erie, Pennsylvania, will help KCSR meet increasing economic demand, and are more energy-efficient and produce significantly less carbon emissions than the locomotives they are replacing.
The locomotives will be deployed throughout KCSR’s system to accommodate the increased demand for shipments of coal, chemicals, grain, sand, stone, gravel, plastics, metals, and automobiles.
The loan is from the Federal Railroad Administration’s Railroad Rehabilitation and Improvement Financing (RRIF) Program.
Good news for KCSR, but they could afford these locos without government support. It seems this is backdoor government subsidy to GE.
If this company wanted to raise some cash they could do it in a week. Given their current market cap of $7.5 billion, it could do a secondary offering of stock and raise $100mm in the bat of an eye. If it wanted debt financing, that too would be available from yield hungry investors. Given the strength of the balance sheet, I think they could add another $200mm in debt without much of a problem at all.
But KSU is not going to the capital markets for the money they need to expand. Why should they? After all, Uncle Sam is willing to lend them cheap money.
GE pays next to no taxes in the US, they haven’t for years. But when it comes to government money, they are on the top of the list for handouts.
(from ZeroHedge)