We believe earnings of Pacific National Holdings Pty Ltd. (PN), will improve gradually due to efficiencies, improvement in intermodal and steel volumes, and new coal contracts after challenges during the past few years. We now forecast the Australian rail haulage operator's ratio of funds from operations (FFO) to debt will improve to 15.0%-15.5% over the next one to two years from about 13.5% in fiscal 2025 (ended June 30). PN's implemented and expected cost-saving initiatives, non-strategic asset sales, and disciplined shareholder distributions will support this. Reflecting this, we affirmed our long-term issuer credit rating on the company, long-term issue ratings on its senior unsecured notes at 'BBB-' and long-term issue rating on its subordinated capital bonds at 'BB'. The negative
