Moody's cuts CP Rail

Moody's Investors Service said it downgraded Canadian Pacific Railway Co.'s senior unsecured ratings to Baa2 from Baa1.

The downgrade follows parent Canadian Pacific Railway Ltd. reporting it agreed to acquire Kansas City Southern for about $29 billion, the funding of which includes raising about $8.6 billion in debt.

CP has secured financing the financing. As part of the deal, it will also assume KCS' about $3.8 billion of outstanding debt.

"The downgrade reflects the increase in adjusted leverage, which will exceed 3X through 2023," said Jamie Koutsoukis, a Moody's analyst in a press release. "It also incorporates the regulatory and integration risks of the acquisition.”

The outlook remains stable.

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