KCS Mexico Legal Action

KCS 01/15/02  announced that Mexican courts have agreed to hear legal actions initiated by NAFTA Rail, KCS’ Mexican subsidiary, challenging certain resolutions adopted by Grupo Transportación Ferroviaria Mexicana S.A. de C.V. late last year. NAFTA Rail challenges the approval of a dividend to Grupo TFM shareholders (KCS and Grupo Transportación Maritima Mexicana S.A. de C.V. control TFM through Grupo TFM), and TFM’s lease of the northern half of the international railroad bridge at Laredo, Texas, from Mexrail, Inc., which operates The Texas Mexican Railway (KCS owns 49 percent of Mexrail; TMM, 51 percent). NAFTA Rail officials pursued legal actions because they believe the resolutions were adopted in contravention of NAFTA Rail's minority shareholder rights at Grupo TFM. "This matter is between KCS and TMM — we fully support Grupo TFM and its management, and Grupo TFM continues to develop as the premiere rail carrier in Mexico,'' said KCS Assistant Vice President Corporate Affairs William Galligan in a prepared statement, adding that KCS plans to continue taking all actions necessary to protect its Mexican investment and rights. KCS wanted TFM to hold off paying a dividend until KCS and Grupo TMM buy the Mexican government’s 24.6 percent TFM share, which might occur later this year. Grupo TMM Jan. 16 released a statement saying the company is aware that KCS, through its Mexican subsidiary, commenced legal action in Mexico challenging certain resolutions, but that neither Grupo TMM nor Grupo TFM have yet been served with any legal documents. "All actions taken by Grupo TFM were in accordance with Mexican law and Grupo TFM's governance documents," said Romaldo Segovia, Grupo TFM board secretary, in a prepared statement