Press Release

DBRS Morningstar Assigns Rating of “A” with a Stable Trend to Canadian National Railway's New Notes

April 29, 2020

DBRS Limited (DBRS Morningstar) assigned a rating of “A” with a Stable trend to the USD 600 million Notes (the Notes) issued by Canadian National Railway Company (CN or the Company). The Notes were issued under the base-shelf prospectus dated February 11, 2020, and are pursuant to CN’s June 1, 1998, trust indenture. The rating being assigned is based upon the rating on already-outstanding series of the above-mentioned debt instrument.

The Notes will mature in 2050 and rank equally and rateably with all of CN’s other unsecured and unsubordinated obligations. Proceeds of the Notes will be used for general corporate purposes, including redemption and refinancing of outstanding indebtedness, share repurchases, acquisitions, and other business opportunities.

The current rating reflects CN’s continued strong market position and focus on operating efficiency despite recent headwinds and unforeseen events which negatively affected the Company. While revenues and earnings grew in the last 12 months ended Q1 2020, overall volumes were adversely affected, especially during the latter part of 2019 and Q1 2020 because of softening economic conditions, the eight-day conductors’ strike in Q4, and rail blockades that occurred in February, most notably on the eastern part of CN’s network, as well as the Coronavirus Disease (COVID-19) pandemic in late March. The Stable trend reflects DBRS Morningstar’s expectation that the Company will continue to execute on efforts to operate its business in a resilient and sustainable manner while maintaining a financial profile consistent with the ratings, such as adjusted debt-to-EBITDA below 2.00 times (x) and adjusted cash flow-to-debt above 40% on a long-term basis. CN’s financial profile as of the last 12 months ended Q1 2020 is considered somewhat weaker than in the past for the current ratings but DBRS Morningstar expects the resumption of stronger credit metrics in the near term because of CN’s prudent and conservative financial policies.

DBRS Morningstar expects the Company’s financial metrics to remain commensurate with the rating and does not see any near-term factors that could lead to a positive rating action; however, an erosion in leverage caused by weaker earnings and/or higher debt to fund shareholder distributions, such that cash flow-to-debt declines below 35% and debt-to-EBITDA increases above 2.0x on a sustained basis, could lead to a negative rating action.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Railway Industry (January 24, 2020), DBRS Morningstar Criteria Commercial Paper Liquidity Support for Non-Bank Issuers (March 10, 2020), DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 22, 2020) and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (November 25, 2019) which can be found on under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit or contact us at [email protected].

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