Debt

12 Months Ended

Dec. 31, 2018

The following table outlines the Company's outstanding debt instruments and capital lease obligations as at December 31, 2018.



(in millions of Canadian dollars except percentages)			Maturity	Currency in which payable	2018		2017
6.500%	10-year Notes	(A)	May 2018	U.S.$	$	—	$	345
6.250%	10-year Medium Term Notes	(A)	Jun 2018	CDN$	—		375
7.250%	10-year Notes	(A)	May 2019	U.S.$	477		439
9.450%	30-year Debentures	(A)	Aug 2021	U.S.$	341		314
5.100%	10-year Medium Term Notes	(A)	Jan 2022	CDN$	125		125
4.500%	10-year Notes	(A)	Jan 2022	U.S.$	339		311
4.450%	12.5-year Notes	(A)	Mar 2023	U.S.$	477		438
2.900%	10-year Notes	(A)	Feb 2025	U.S.$	955		878
3.700%	10.5-year Notes	(A)	Feb 2026	U.S.$	340		313
4.000%	10-year Notes	(A)	Jun 2028	U.S.$	682		—
7.125%	30-year Debentures	(A)	Oct 2031	U.S.$	477		439
5.750%	30-year Debentures	(A)	Mar 2033	U.S.$	334		307
4.800%	20-year Notes	(A)	Sep 2035	U.S.$	408		375
5.950%	30-year Notes	(A)	May 2037	U.S.$	607		558
6.450%	30-year Notes	(A)	Nov 2039	CDN$	400		400
5.750%	30-year Notes	(A)	Jan 2042	U.S.$	336		308
4.800%	30-year Notes	(A)	Aug 2045	U.S.$	748		687
6.125%	100-year Notes	(A)	Sep 2115	U.S.$	1,228		1,129
5.41%	Senior Secured Notes	(B)	Mar 2024	U.S.$	113		111
6.91%	Secured Equipment Notes	(C)	Oct 2024	CDN$	106		120
7.49%	Equipment Trust Certificates	(D)	Jan 2021	U.S.$	57		52
Obligations under capital leases
6.99%		(E)	Mar 2022	U.S.$	104		96
6.57%		(E)	Dec 2026	U.S.$	52		52
12.77%		(E)	Jan 2031	CDN$	4		3
					8,710		8,175
Perpetual 4% Consolidated Debenture Stock		(F)		U.S.$	41		38
Perpetual 4% Consolidated Debenture Stock		(F)		G.B.£	6		6
					8,757		8,219
Less: Unamortized fees on long-term debt					61		60
					8,696		8,159
Less: Long-term debt maturing within one year					506		746
					$	8,190	$	7,413

At December 31, 2018, the gross amount of long-term debt denominated in U.S. dollars was U.S. $5,970 million (2017 – U.S. $5,755 million).

Annual maturities and principal repayment requirements, excluding those pertaining to capital leases, for each of the five years following 2018 are (in millions): 2019 – $501; 2020 – $67; 2021 – $382; 2022 – $494; 2023 – $507.

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

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

During the second quarter of 2018, the Company repaid U.S. $275 million 6.500% 10-year Notes at maturity for a total of U.S. $275 million ($352 million) and $375 million 6.250% 10-year Medium Term Notes at maturity for a total of $375 million. The Company also issued U.S. $500 million 4.000% 10-year Notes due June 1, 2028 for net proceeds of U.S. $495 million ($638 million). In conjunction with the issuance, the Company settled a notional U.S. $500 million of forward starting floating-to-fixed interest rate swap agreements ("forward starting swaps") for a payment of U.S. $19 million ($24 million) (see Note 18). This payment was included in cash provided by operating activities consistent with the location of the related hedged item on the Company's Consolidated Statements of Cash Flows.

B. The 5.41% Senior Secured Notes are collateralized by specific locomotive units with a carrying value of $111 million at December 31, 2018. 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 $81 million at December 31, 2018. 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 $107 million at December 31, 2018. 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, 2018, capital lease obligations included in long-term debt were as follows:



(in millions of Canadian dollars)	Year	Capital leases
Minimum lease payments in:
	2019	$	16
	2020	16
	2021	16
	2022	114
	2023	9
	Thereafter	31
Total minimum lease payments		202
Less: Imputed interest		(43		)
Present value of minimum lease payments		159
Less: Current portion		(5		)
Long-term portion of capital lease obligations		$	154

During the years ended 2018, 2017, and 2016, the Company had no additions to property, plant and equipment under capital lease obligations.

The carrying value of the assets collateralizing the capital lease obligations was $187 million at December 31, 2018.

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. $1.0 billion. 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. As at December 31, 2018 and 2017, the Company was in compliance with all terms and conditions of the credit facility arrangements and satisfied the threshold stipulated in this financial covenant.

Effective June 8, 2018, the Company amended its U.S. $2.0 billion revolving credit facility agreement dated September 26, 2014. This fifth amending agreement included the extension of the U.S. $1.0 billion five-year maturity date from June 28, 2022 to June 28, 2023 and the cancellation of the U.S. $1.0 billion one-year plus one-year credit facility agreement.

As at December 31, 2018 and 2017, the facility was undrawn. The amount available under the terms of the credit facility was U.S. $1.0 billion at December 31, 2018 (December 31, 2017 – U.S. $2.0 billion).

The Company also has a commercial paper program which enables it to issue commercial paper up to a maximum aggregate principal amount of U.S. $1.0 billion in the form of unsecured promissory notes. This commercial paper program is backed by the revolving credit facility. As at December 31, 2018, the Company had no commercial paper borrowings outstanding (December 31, 2017 – $nil).

CP has bilateral letter of credit facilities with six 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. As at December 31, 2018, the Company had no collateral posted on its bilateral letter of credit facility (December 31, 2017– $150 million). At December 31, 2018, under its bilateral facilities the Company had letters of credit drawn of $60 million (December 31, 2017 – $319 million) from a total available amount of $600 million (December 31, 2017 – $600 million).