DBRS Comments on CP’s Change in Management

Canadian Pacific Railway Company (CP or the Company) announced today the resignation of CEO Fred Green. Chairman of the Board John Cleghorn has also stepped down and four other directors will not be standing for re-election. These resignations come preceding a shareholders’ vote in Calgary and following a four-month proxy battle with hedge fund Pershing Square Capital Management, L.P. (Pershing). Pershing had previously become CP’s largest shareholder upon acquiring a 12.2% stake in CP, and currently owns 14.2% of CP’s shares.

The change in management alone does not have any immediate impact on the Company’s credit rating. However, with Mr. Green’s resignation, there could be some concern about the execution and status of CP’s current multi-year plan, which could impede progress toward its stated target of achieving a 70% to 72% operating ratio by 2014 and an operating ratio of 68.5% to 70.5% by 2016.

DBRS will evaluate the incoming CEO’s new plan and strategy to determine any potential changes to the Company’s capital structure, business strategy or financial policy, then evaluate whether any such changes will affect the Company’s credit profile.

Notes:
The applicable methodology is Rating Companies in the North American Railway Industry, which can be found on our website under Methodologies.