1 April 2009
CP Dumps 2/3 of its Stake in Detroit-Windsor Tunnel Project
Detroit-Windsor Tunnel - artist's
conception.
Windsor Ontario - Canadian Pacific Railway Ltd. is
selling 67 percent of its stake in the Detroit-Windsor Tunnel crossing to Borealis Infrastructure Management Ltd. for
$132 million, the railway announced Wednesday.
Borealis, which manages infrastructure projects for the huge OMERS pension fund, will pay $110 million outright plus another $22
million, depending upon traffic volumes, for 33.5 percentage points of CP Rail's ownership portion in the tunnel.
Upon the conclusion of the deal, Borealis will own 83.5 percent of the project, while CP will hang on to a 16.5 percent minority stake
in the tunnel which links Detroit and Windsor, Ont., and is reportedly the busiest rail and truck crossing in the world.
"This transaction allows us to realize value for our asset and strengthen our balance sheet while preserving our right to operate
the tunnel", said Kathryn McQuade, CP's chief financial officer.
Canadian Pacific has not appeared on anyone's list of obviously troubled firms.
Still, the railroad had $117 million in cash at the year of its last fiscal year, down substantially from $378.1 million in 2007.
That reduction might indicate a problem with the company's cash-burn and, with credit harder to come by, management
appeared interested in shoring up its available reserves.
For Borealis and OMERS, boosting its holdings in the border crossing makes business sense.
"The Detroit River tunnel is an investment that fits into our long-term strategy of securing infrastructure assets
that can generate stable and sustainable returns for OMERS plan members", said Michael Nobrega, president and chief executive
officer of the giant pension fund.
Canadian retirement funds have been snapping up physical assets, such as real estate and shopping centres for years, in order to
diversify their investment portfolios.
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