IAN LA COUVEE C&PA, MONTREAL - One of the more interesting stories behind the big story failed to emerge from under the blanket of media attention that greeted last month's historic developments at CP Rail System and parent Canadian Pacific Limited.

Under the parent company's proposed restructuring, the existing Canadian Pacific Limited would essentially become CP Rail System, while a new Canadian Pacific Limited would be created.

With that move, the railway would be reborn as a corporation. The proposed restructuring is one of the most ambitious programs ever undertaken by Canadian Pacific Limited, the corporate name it established in 1971 after 87 years as the Canadian Pacific Railway Co.

The reorganization that's taking CP Rail System headquarters to Calgary was just one of several departures from tradition launched by Canadian Pacific the week of 20 Nov 1995.

With its incorporation, the railway no longer would be a division, but one of six wholly-owned Canadian Pacific Limited subsidiaries, joining CP Ships, PanCanadian Petroleum, Fording Coal, Marathon Realty, and Canadian Pacific Hotels & Resorts.

Restructuring by creating a new Canadian Pacific reflects the company's obligations under its original charter, primarily the obligation to operate the railway in perpetuity.

That charter would make it difficult to spin the railway out of the existing Canadian Pacific, while under the new structure, the railway obligations would be where they properly belong, with the railway.

These moves will unfold once Canadian Pacific Limited's restructuring program is approved by shareholders (a two-thirds majority is required), the courts and the federal transportation regulator (more on this later), with all approvals expected by mid-1996.

But that's just part of the story.

Following shareholder approval, CP Limited will issue 3.3 million new Common shares to convert the more than 14 million Preference shares into Common stock. By adding these shares to the pool of Common stock, the overall number of shares increases by less than one percent.

That move marks another departure from tradition, spelling the end of a linguistic anachronism by converting "Ordinary" shares to "Common" shares, the current marketplace terminology.

Which leads this story back to the railway.

Under the proposed arrangement, CP Rail System (as a corporation rather than a division) would gain commercial flexibility, allowing it to raise capital and participate in such transactions as mergers, sales, and joint ventures.

However, while the railway's incorporation is part of the "approval-required" package, some components of the parent company's restructuring program will go ahead almost immediately, including the railway reorganization, a $700 million provision for write downs and other charges, and a dividend increase.

As part of its commitment to improve shareholders' return on investment, Canadian Pacific Limited is increasing its fourth-quarter dividend by 50 percent, to 12 cents. This move marks the first dividend hike since 1991, when the corporation set the quarterly rate at eight cents.

The dividend increase could be a sign of the good fortunes Canadian Pacific Limited foresees under its new structure.

"With PanCanadian Petroleum, Fording Coal, CP Ships, and Canadian Pacific Hotels & Resorts now firmly established as leaders in their industries and with CP Rail System making solid progress in addressing its operating, regulatory, and organizational challenges, Canadian Pacific is in a position to provide its shareholders with an improved return on investment," the company said 20 Nov 1995.

Among the challenges ahead, of course, is the regulatory approval referred to earlier in this story.

Under the National Transportation Act, 1987, the federal regulator must approve of Canadian Pacific Limited's proposed re-structuring.

But, under the Canada Transportation Act, or Bill C-101, tabled in Parliament earlier this year and expected to become law sometime in the near future, the company's proposed restructuring would not require approval from the transportation regulator.