Canadian Pacific Railway Company, a wholly owned subsidiary of Canadian Pacific Railway Limited (CP), has announced a debt offering of $379 million.
The debt offering carries a coupon interest rate of 6.45% and will expire in November 2039. The offering will result in net proceeds of $377 million, which will be used for general corporate purposes including payment of debt and pension fund obligations.
The offering is being made in Canada under a shelf prospectus issued in June 2009 for up to $1.42 billion in medium-term notes.
Debt issued during the second quarter of 2009 included $350 million 7.25% 10-year notes for net proceeds of $408.5 million.
As of Sept. 30, 2009, the debt-to-capital ratio stood at 38.1%, fairly lower than targeted levels of 50.0%. However, interest coverage ratio at 3.2x was lower than the comfort levels of 4.0x. The interest coverage ratio has decreased due to a reduction in earnings and the unfavourable impact of a weakening Canadian dollar. The interest coverage ratio is below the management target due to lower volumes as a result of the global recession that occurred during the period.
Also as of Sept. 30, 2009, the company remains in compliance with all external financial covenants. In addition, earlier during the year, Canadian Pacific issued 13.9 million common shares, generating net proceeds of $488.9 million. The company also monetized certain assets to reduce indebtedness and further augment its cash position due to ongoing uncertainty about the timing of the economic recovery.
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