The Financial Post reports in its Tuesday, March 23, edition that risk spreads on Canadian Pacific Railway's bonds are widening because the company's plan to buy Kansas City Southern for $25-billion (U.S.) will push up debt ratios. A Bloomberg dispatch to the Post reports that CP expects to have $20.2-billion (U.S.) of debt outstanding after the deal, which it will pay for with a combination of shares, cash on hand and $8.6-billion (U.S.) in new debt financing. Bloomberg reports that CP is assuming $3.8-billion (U.S.) of KCS obligations. As a result, CP expects the combined company's leverage ratio will rise to approximately four times from CP's previous range of two to 2.5 times. It is aiming to return leverage to about 2.5 times within 36 months after closing a key portion of the transaction. Bank of Montreal and Goldman Sachs Group have committed to an $8.6-billion (U.S.) bridge loan, which is expected to be syndicated.
© 2021 Canjex Publishing Ltd. All rights reserved.