29 November 2007
Moody's Downgrades Canadian Pacific Railway, Citing Effects from DM&E Railroad Acquisition
Moody's Investors Service on Thursday downgraded the debt ratings
of railroad operator Canadian Pacific Railway Ltd. to "Baa3," citing effects from the company's acquisition of the Dakota,
Minnesota & Eastern Railroad Corp. in October.
"Baa3" is the lowest investment grade, and a one-notch downgrade would take Canadian Pacific to junk status.
Moody's said the transaction has increased Canadian Pacific's debt by 30 percent to about $6 billion.
Also, approval by the Surface Transportation Board - an economic regulatory agency affiliated with the U.S. Department of
Transportation - has been delayed and set for the fourth quarter of next year.
Until the deal is approved by the STB, Canadian Pacific does not have control over operations or cash flows of DM&E, Moody's said.
Moody's said that a further downgrade is unlikely unless Canadian Pacific makes more investments with DM&E before stabilizing its
finances.
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