Debt



(in millions of Canadian dollars)		Maturity	Currency in which payable	2016		2015
6.500%	10-year Notes (A)	2018-05	U.S.$	$	369	$	380
6.250%	10-year Medium Term Notes (A)	2018-06	CDN$	375		374
7.250%	10-year Notes (A)	2019-05	U.S.$	469		484
9.450%	30-year Debentures (A)	2021-08	U.S.$	336		346
5.100%	10-year Medium Term Notes (A)	2022-01	CDN$	125		125
4.500%	10-year Notes (A)	2022-01	U.S.$	333		343
4.450%	12.5-year Notes (A)	2023-03	U.S.$	469		483
7.125%	30-year Debentures (A)	2031-10	U.S.$	470		484
5.750%	30-year Debentures (A)	2033-03	U.S.$	328		339
5.950%	30-year Notes (A)	2037-05	U.S.$	597		615
6.450%	30-year Notes (A)	2039-11	CDN$	400		400
5.750%	30-year Notes (A)	2042-01	U.S.$	330		340
2.900%	10-year Notes (A)	2025-02	U.S.$	940		968
3.700%	10.5-year Notes (A)	2026-02	U.S.$	335		345
4.800%	30-year Notes (A)	2045-08	U.S.$	736		759
4.800%	20-year Notes (A)	2035-09	U.S.$	401		413
6.125%	100-year Notes (A)	2115-09	U.S.$	1,208		1,246
5.41%	Senior Secured Notes (B)	2024-03	U.S.$	126		138
6.91%	Secured Equipment Notes (C)	2024-10	CDN$	133		145
7.49%	Equipment Trust Certificates (D)	2021-01	U.S.$	56		64
Other long-term loans (nil% – 5.50%)		2016 – 2025	U.S.$/CDN$	—		10
Obligations under capital leases
	(6.313% – 6.99%) (E)	2022 – 2026	U.S.$	163		172
	(12.77%) (E)	2031-01	CDN$	3		3
				8,702		8,976
Perpetual 4% Consolidated Debenture Stock (F)			U.S.$	41		42
Perpetual 4% Consolidated Debenture Stock (F)			G.B.£	6		7
				8,749		9,025
Less: Unamortized fees on long-term debt				65		68
				8,684		8,957
Less: Long-term debt maturing within one year				25		30
				$	8,659	$	8,927

At December 31, 2016, the gross amount of long-term debt denominated in U.S. dollars was U.S. $5,763 million (2015 – U.S. $5,788 million).

Annual maturities and principal repayment requirements, excluding those pertaining to capital leases, for each of the five years following 2016 are (in millions): 2017 – $21; 2018 – $766; 2019 – $493; 2020 – $66; 2021 – $377.

Fees on long-term debt are amortized to income over the term of the related debt.

During the year ended December 31, 2015, the Company repaid Senior Secured Notes in advance of their maturities for a total of U.S. $285 million ($379 million). The repayments were inclusive of the remaining principal of the notes, totalling U.S. $247 million ($329 million), early redemption premiums of U.S. $34 million ($45 million), and accrued interest of U.S. $4 million ($5 million). The early redemption premiums and accrued interest are included in “Other income and charges” and “Net interest expense” on the Company's Consolidated Statements of Income, respectively. The Company also expensed the unamortized financing fees of $2 million to “Other income and charges” upon payments of the notes.

A. These debentures and notes pay interest semi-annually and are unsecured, but carry a negative pledge.

During the first quarter of 2015, the Company issued U.S. $700 million 2.900% 10-year Notes due February 1, 2025 for net proceeds of U.S. $694 million ($873 million). In addition, the Company settled a notional U.S. $700 million of forward starting floating-to-fixed interest rate swap agreements (“forward starting swaps”) for a payment of U.S. $50 million ($63 million) cash (see Note 17). This payment was included in the same line item as the related hedged item on the Company's Consolidated Statements of Cash Flows. Inclusive of the settlement of the forward starting swap, the annualized effective yield at issuance was 3.61%.

During the third quarter of 2015, the Company issued U.S. $550 million 4.800% 30-year Notes due August 1, 2045 and U.S. $250 million 3.700% 10.5-year notes due February 1, 2026 for a total of U.S. $800 million with net proceeds of U.S. $789 million ($1,032 million).

During the third quarter of 2015, the Company also issued U.S. $900 million 6.125% 100-year Notes due September 15, 2115 and U.S. $300 million 4.800% 20-year Notes due September 15, 2035 for a total of U.S. $1,200 million with net proceeds of U.S. $1,186 million ($1,569 million). At the time of the debt issuance the Company de-designated the hedging relationship for U.S. $700 million of the existing forward starting swaps. The Company did not cash settle these swaps and therefore recorded a non-cash loss of U.S. $36 million ($47 million) in “Accumulated other comprehensive loss” (see Note 17). Subsequently, the Company re-designated U.S. $700 million forward starting swaps as a hedging relationship to fix the benchmark rate on cash flows associated with a highly probable forecasted issuance of long-term notes.

B. The 5.41% Senior Secured Notes are collateralized by specific locomotive units with a carrying value of $124 million at December 31, 2016. The Company pays equal blended semi-annual payments of principal and interest. Final repayment of the remaining principal of U.S. $44 million is due in March 2024.

C. The 6.91% Secured Equipment Notes are full recourse obligations of the Company collateralized by a first charge on specific locomotive units with a carrying value of $115 million at December 31, 2016. The Company pays equal blended semi-annual payments of principal and interest. Final repayment of the remaining principal of $11 million is due in October 2024.

D. The 7.49% Equipment Trust Certificates are secured by specific locomotive units with a carrying value of $117 million at December 31, 2016. The Company makes semi-annual payments that vary in amount and are interest-only payments or blended principal and interest payments. Final repayment of the remaining principal of U.S. $11 million is due in January 2021.

E. At December 31, 2016, capital lease obligations included in long-term debt were as follows:



(in millions of Canadian dollars)	Year	Capital leases
Minimum lease payments in:
	2017	$	16
	2018	16
	2019	16
	2020	16
	2021	16
	Thereafter	152
Total minimum lease payments		232
Less: Imputed interest		(66		)
Present value of minimum lease payments		166
Less: Current portion		(4		)
Long-term portion of capital lease obligations		$	162

During 2016, the Company had no additions to property, plant and equipment under capital lease obligations (2015 – $nil; 2014 – $nil).

The carrying value of the assets collateralizing the capital lease obligations was $206 million at December 31, 2016.

F. The Consolidated Debenture Stock, authorized by an Act of Parliament of 1889, constitutes a first charge upon and over the whole of the undertaking, railways, works, rolling stock, plant, property and effects of the Company, with certain exceptions.

Credit facility

CP has a revolving credit facility (the “facility”) agreement with 15 highly rated financial institutions for a commitment amount of U.S. $2 billion. The facility includes a U.S. $1 billion one-year plus one-year term-out portion and a U.S. $1 billion five-year portion. The facility can accommodate draws of cash and/or letters of credit at market competitive pricing. The agreement requires the Company not to exceed a maximum debt to earnings before interest, tax, depreciation, and amortization ratio.

Effective June 28, 2016, the Company extended the maturity date by one year on its credit facility. The maturity date on the first U.S. $1 billion tranche was extended to June 28, 2018; the maturity date on the second U.S. $1 billion tranche was extended to June 28, 2021. As at December 31, 2016 and 2015, the Company was in compliance with all terms and conditions of the credit facility arrangements and satisfied the threshold stipulated in the amended financial covenant. As at December 31, 2016 and 2015, the facility was undrawn.

The amount available under the terms of the credit facility was U.S. $2 billion at December 31, 2016 (December 31, 2015 – U.S. $2 billion).

The Company has also established a commercial paper program which enables it to issue commercial paper up to a maximum aggregate principal amount of U.S. $1 billion in the form of unsecured promissory notes. The commercial paper program is backed by the U.S. $1 billion committed, revolving credit facility tranche which matures on June 28, 2018. The Company had no commercial paper borrowings as at December 31, 2016 (December 31, 2015 – $nil).

CP has bilateral letter of credit facilities with 6 highly rated financial institutions to support its requirement to post letters of credit in the ordinary course of business. Under these agreements, the Company has the option to post collateral in the form of cash or cash equivalents, equal at least to the face value of the letter of credit issued. These agreements permit CP to withdraw amounts posted as collateral at any time; therefore, the amounts posted as collateral are presented as “Cash and cash equivalents” on the Company’s Consolidated Balance Sheets.

At December 31, 2016, under its bilateral facilities the Company had letters of credit drawn of $320 million (December 31, 2015 – $375 million) from a total available amount of $600 million (December 31, 2015 – $600 million). At December 31, 2016, under the terms of the bilateral letter of credit facilities, no cash and cash equivalents was recorded as “Restricted cash and cash equivalents” (December 31, 2015 – $nil).