Increased Railroad Interest Boosts CP Rail Debt Issue

Warren Buffet isn’t the only investor buying into railroads.

Canadian Pacific Railway (CP) attracted the fixed income crowd on Thursday with a $400 million 30-year bond issue. It was the railway’s first new issue since May 2008, and the underwriting was led by CIBC World Markets and RBC Dominion Securities.

CP Rail, an obvious economic recovery play, was able to sell bonds at the low end of the expected range. The new debt carries a 6.45% interest rate, and that’s 240 basis points above the rate on the comparable Government of Canada bond. Going into this financing, underwriters expected the railway would face a 240 to 250 basis point premium on its borrowing.