Canadian Pacific Railway Ltd. (CP, CP.TO) said Tuesday morning that its wholly-owned subsidiary, Canadian Pacific Railway Co., has commenced an offering of US$300 million of 10-year notes. The company plans to use the net proceeds from the offering to partially finance the repurchase of certain of its outstanding U.S. dollar denominated long-term debt securities pursuant to a tender offer announced Tuesday. The balance amount, if any, is intended to be used for general corporate purposes.
Canadian Pacific Railway Co. has also commenced a cash tender offer to purchase up to US$450 million of its outstanding notes. These include 6.25% notes maturing in October 2011, 5.75% notes due May 2013 and 6.50% notes due May 2018. The offer is part of the company's efforts to enhance its capital structure and improve its debt maturity profile.
The company noted that the 2013 notes as well as the 2018 notes were issued in May 2008 to repay a portion of the company's indebtedness incurred to acquire Dakota, Minnesota and Eastern Railroad Corp, or DM&E. The company has about C$4.79 billion in long-term debt, of which C$65.3 million is due within a year.
The company said that holders of securities that are validly tendered and not validly withdrawn on or before the early tender date of May 27, 2009, and accepted for purchase will receive the full tender offer consideration. Holders of securities that are validly tendered after May 27, 2009 but on or before the expiration date of June 10, 2009 and accepted for purchase will receive the full tender offer consideration minus an amount in cash equal to US$30 for each US$1,000 principal amount of securities.
In April, Canadian Pacific reported a 31% decline in profit for the first quarter to C$62.5 million from C$90.7 million, in the year-ago quarter. On a per share basis, earnings for the quarter declined to C$0.39 from C$0.59 in the same period last year. Revenues for the quarter were C$1.07 billion, down 6.9% from C$1.15 billion in the year-ago period. The results for the quarter reflected declining freight-traffic volume. Canadian Pacific has been particularly hard-hit because of its significant exposure to fertilizer and coal.
At that time, the company said it plans to reduce its capital program in 2009 to a range of C$720 million-C$740 million, down from prior estimate of C$800 million- C$820 million.
As of March 31, 2009, Canadian Pacific's cash and cash equivalents were C$566.5 million, compared to C$117.6 million as at December 31, 2008.
In Tuesday's regular trading session on the NYSE, CP is trading at US$36.77 down US$0.20 or 0.54% on a volume of 0.32 million shares. In the past 52 weeks, the stock has been trading in a range of US$25.11-US$76.15.
On the Toronto Stock Exchange, CP.TO is trading at C$42.79, down C$0.21 or 0.49% on a volume of 0.60 million shares. The stock has been trading in a range of C$32.36-C$74.70 in the past 52 weeks.
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