Press Release: Canadian Pacific Limited
June 14, 2001
CALGARY, AB -- In order to provide additional information to the investment community, Canadian Pacific Limited
(CPL) announced yesterday further details relating to its proposed reorganization. CPL disclosed the expected proforma
capitalization of its operating companies, pursuant to its previously announced intention to divide CPL into five
separate, publicly traded companies. Inter-company settlements were determined with the intention to capitalize
each company with amounts of debt and equity that are appropriate for its growth prospects and the industry in
which it operates. In addition, the inter-company settlements will allow CPL to repay its outstanding third-party
debt and meet other obligations prior to, and upon completion of, the reorganization.
An information circular, expected to be mailed to shareholders in mid- August, will contain proforma financial
statements dated June 30, 2001. Based on these proforma financial statements, CPL expects that each of its five
main operating companies will have financial ratios consistent with an investment grade rating. Canadian Pacific
Hotels & Resorts (the proposed successor to CPL) and Fording will each have net debt to net debt plus book
equity ("capital") ratios of less than 20% and book equity of approximately $2 billion and $0.6 billion,
respectively. Canadian Pacific Railway is expected to have book equity of approximately $3 billion and a net debt
to capital ratio of approximately 50%. CPL currently anticipates that CP Ships' book equity will be in the order
of $1.7 billion with a net debt to capital ratio, before consideration of operating leases, of less than 10%. Information
regarding PanCanadian Petroleum Limited's ("PanCanadian") capitalization can be obtained from its published
financial statements.
The inter-company settlements reflect, among other things, proposed special distributions by PanCanadian of approximately
$1.18 billion to all of its shareholders, ($1 billion net to CPL), and by Canadian Pacific Railway to CPL of an
amount which has now been set at approximately $700 million. The PanCanadian dividend and the distribution by Canadian
Pacific Railway are subject to approval by their respective boards of directors.
Readers are cautioned that currently proposed inter-company settlements, including transfers of assets and repayments
and assumptions of obligations, are subject to possible changes for various reasons, including changed or re-evaluated
business requirements or strategies and financial conditions. Moreover, while these capitalizations reflect CPL's
current intentions with respect to spinning off its businesses, CPL's plan could be modified in response to market
conditions as the process continues to unfold. While it is currently envisioned that, under the current plan, at
the completion of the transaction, Canadian Pacific Hotels & Resorts will be the only significant business
of CPL, the plan may be modified in that regard. More definitive capitalizations will be announced when the transaction
is given final board approval and proxy material is made available to shareholders.
CPL also announced plans to provide its Preferred Shareholders the choice of receiving $26.00 per share (plus accrued
but unpaid dividends) for their Preferred Shares, or receiving identical preferred shares of a special purpose
corporation holding sufficient Government of Canada or similar securities to fund ongoing dividends and a potential
redemption in 2004, or retaining their existing Preferred Shares in CPL post spin-off. As at the date hereof, there
are 8.8 million Preferred Shares outstanding.
On February 13, 2001, CPL announced its intended reorganization designed to maximize value for CPL's shareholders
by unlocking the current value of CPL's businesses and by strengthening their ability to pursue even greater success
as independent companies. The transaction will be implemented through a Plan of Arrangement under the Canada Business
Corporations Act, and will be subject to approval of the Court of Queen's Bench of Alberta. CPL will apply for
an Interim Order on July 3, 2001, authorizing it to hold a special shareholders meeting and to conduct voting on
the Plan. CPL currently anticipates that proxy material will be mailed to shareholders in mid-August, for a meeting
on or about September 26, 2001. It is anticipated that a meeting of PanCanadian shareholders will be held at approximately
the same time. Shortly thereafter, subject to a favourable Canadian tax ruling and certain other conditions, CPL
plans to make a final application to the Court for approval to implement the Plan.
Calgary-based, CPL is a diversified operating company active in transportation, energy and hotels. The CPL group
of companies includes Canadian Pacific Railway, CP Ships, PanCanadian, Fording and Canadian Pacific Hotels &
Resorts. The Common Shares of CPL are listed on the Toronto and New York stock exchanges. CPL's Preferred Shares
are listed on The Toronto Stock Exchange.
Note: This news release contains forward-looking information. Actual results may differ materially and proposed
plans of action could change. The risks, uncertainties and other factors that could influence actual results are
described in CPL's annual report to shareholders and annual information form.
Additional information on CPL is available on the corporate website www.cp.ca