S&P rates Canadian Pacific notes BBB+

S&P said it rated Canadian Pacific Railway Co.’s planned $3.1 billion of senior unsecured notes BBB+.

The BBB+ rating is the same as the issuer credit rating because there are no significant elements of subordination risk in the capital structure, the agency said.

“We believe CP will offer the proposed notes to the holders of Kansas City Southern's (KCS) unsecured notes due beyond 2023 with the intention of replacing those obligations at similar terms and with a new obligor. We expect CP will address KCS' notes due in 2023 over the next few months. The proposed debt-obligor exchange is contingent on the CP-KCS merger closing, which we expect will occur over the next few weeks. Upon closing of the transaction, we expect CP's pro forma adjusted debt-to-EBITDA ratio will be about 3.5x, followed by prospective deleveraging to about 2.5x by 2024,” S&P said in a press release.

The outlook is stable.

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