Debt



(in millions of Canadian dollars)		Maturity	Currency in which payable	2015		2014
6.500%	10-year Notes (A)	2018-05	U.S.$	$	380	$	319
6.250%	10-year Medium Term Notes (A)	2018-06	CDN$	374		374
7.250%	10-year Notes (A)	2019-05	U.S.$	484		405
9.450%	30-year Debentures (A)	2021-08	U.S.$	346		290
5.100%	10-year Medium Term Notes (A)	2022-01	CDN$	125		125
4.500%	10-year Notes (A)	2022-01	U.S.$	343		287
4.450%	12.5-year Notes (A)	2023-03	U.S.$	483		405
7.125%	30-year Debentures (A)	2031-10	U.S.$	484		406
5.750%	30-year Debentures (A)	2033-03	U.S.$	339		282
5.950%	30-year Notes (A)	2037-05	U.S.$	615		515
6.450%	30-year Notes (A)	2039-11	CDN$	400		400
5.750%	30-year Notes (A)	2042-01	U.S.$	340		284
2.900%	10-year Notes (A)	2025-02	U.S.$	968		—
3.700%	10.5-year Notes (A)	2026-02	U.S.$	345		—
4.800%	30-year Notes (A)	2045-08	U.S.$	759		—
4.800%	20-year Notes (A)	2035-09	U.S.$	413		—
6.125%	100-year Notes (A)	2115-09	U.S.$	1,246		—
Secured Equipment Loan (B)		2015-08	CDN$	—		62
5.41%	Senior Secured Notes (C)	2024-03	U.S.$	138		121
6.91%	Secured Equipment Notes (D)	2024-10	CDN$	145		156
5.57%	Senior Secured Notes (E)	2024-12	U.S.$	—		65
7.49%	Equipment Trust Certificates (F)	2021-01	U.S.$	64		96
3.88%	Senior Secured Notes Series A & B (G)	2026-10/2026-12	U.S.$	—		148
4.28%	Senior Secured Notes (H)	2027-03	U.S.$	—		77
Other long-term loans (nil% – 5.50%)		2016 - 2025	U.S.$ / CDN$	10		2
Obligations under capital leases
	(6.313% – 6.99%) (I)	2022 - 2026	U.S.$	172		147
	(12.77%) (I)	2031-01	CDN$	3		3
Commercial paper (J)			U.S.$	—		783
				8,976		5,752
Perpetual 4% Consolidated Debenture Stock (K)			U.S.$	42		35
Perpetual 4% Consolidated Debenture Stock (K)			G.B.£	7		6
				9,025		5,793
Less: Unamortized fees on long-term debt				68		34
				8,957		5,759
Less: Long-term debt maturing within one year				30		134
				$	8,927	$	5,625

At December 31, 2015, the gross amount of long-term debt denominated in U.S. dollars was U.S. $5,788 million (2014 – U.S. $4,047 million).

Annual maturities and principal repayments requirements, excluding those pertaining to capital leases, for each of the five years following 2015 are (in millions): 2016 – $26; 2017 – $29; 2018 – $778; 2019 – $508; 2020 – $68.

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 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 20). This payment was included in the same line item as the related hedged item on the 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 20). Subsequently the Company re-designated these 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 Secured Equipment Loan was collateralized by specific locomotive units. The floating interest rate was calculated based on a six-month average Canadian Dollar Offered Rate (calculated based on an average of Bankers’ Acceptance rates) plus 53 basis points (2015 – 1.74%; 2014 – 1.89%; 2013 – 1.93%). The Company made blended payments of principal and interest semi-annually. Final repayment of the remaining principal balance of $53 million was completed in August 2015.

C. The 5.41% Senior Secured Notes are collateralized by specific locomotive units with a carrying value of $130 million at December 31, 2015. 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.

D. 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 $123 million at December 31, 2015. The Company pays equal blended semi-annual payments of principal and interest up to and including October 2024.

E. During the third quarter of 2015, the 5.57% Senior Secured Notes were repaid in advance of their maturities for a total of U.S. $68 million ($91 million). The repayment was inclusive of the remaining principal of the notes, totalling U.S. $55 million ($74 million), an early redemption premium of U.S. $12 million ($16 million), and accrued interest of U.S. $1 million ($1 million). The early redemption premium and accrued interest are included in "Other income and charges" and "Net interest expense" on the Consolidated Statements of Income, respectively. The Company also expensed the unamortized financing fees of $1 million to "Other income and charges" upon payments of the notes.

F. The 7.49% Equipment Trust Certificates are secured by specific locomotive units with a carrying value of $126 million at December 31, 2015. 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.

G. During the third quarter of 2015, the 3.88% Senior Secured Notes Series were repaid in advance of their maturities for a total of U.S. $141 million ($187 million). The repayment is inclusive of the remaining principal of the notes, totalling U.S. $126 million ($168 million), an early redemption premium of U.S. $13 million ($17 million), and accrued interest of U.S. $2 million ($2 million). The early redemption premium and accrued interest are included in "Other income and charges" and "Net interest expense" on the Consolidated Statements of Income, respectively. The Company also expensed the unamortized financing fees of $1 million to "Other income and charges" upon payments of the notes.

H. During the third quarter of 2015, the 4.28% Senior Secured Notes were repaid in advance of their maturities for a total of U.S. $76 million ($101 million). The repayment was inclusive of the remaining principal of the notes, totalling U.S. $66 million ($87 million), an early redemption premium of U.S. $9 million ($12 million), and accrued interest of U.S. $1 million ($2 million). The early redemption premium and accrued interest are included in "Other income and charges" and "Net interest expense" on the Consolidated Statements of Income, respectively. The Company also expensed a negligible amount of unamortized financing fees to "Other income and charges" upon payments of the notes.

I. At December 31, 2015, capital lease obligations included in long-term debt were as follows:



(in millions of Canadian dollars)	Year	Capital leases
Minimum lease payments in:
	2016	$	16
	2017	16
	2018	16
	2019	16
	2020	16
	Thereafter	174
Total minimum lease payments		254
Less: Imputed interest		(79		)
Present value of minimum lease payments		175
Less: Current portion		(4		)
Long-term portion of capital lease obligations		$	171

During 2015, the Company had no additions to property, plant and equipment under capital lease obligations (2014 – $nil; 2013 – $nil).

The carrying value of the assets collateralizing the capital lease obligations was $215 million at December 31, 2015.

J. During the fourth quarter of 2014, the Company established a commercial paper program which enabled 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 a U.S. $1 billion committed, revolving credit facility, which matures on September 23, 2017. During the third quarter of 2015, the Company repaid all of its commercial paper borrowings and had no remaining commercial paper borrowings as at December 31, 2015. As at December 31, 2014, the Company had total commercial paper borrowings of U.S. $675 million ($783 million) presented in "Long-term debt" on the Consolidated Balance Sheets as the Company had the intent and the ability to renew these borrowings on a long-term basis. The weighted-average interest rate on these borrowings as at December 31, 2014 was 0.44%.

The Company presents issuances and repayments of commercial paper in the Consolidated Statements of Cash Flows on a net basis, all of which have a maturity less than 90 days.

K. 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

At September 26, 2014, the Company terminated its then existing revolving credit facility agreement dated as of November 29, 2013. On the same day, CP entered into a new 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 five-year portion and a U.S. $1 billion one-year plus one-year term-out portion. The facility can accommodate draws of cash and/or letters of credit at market competitive pricing. As at December 31, 2014, the facility was undrawn. The agreement required the Company not to exceed a maximum debt to total capitalization ratio. At December 31, 2014, the Company had satisfied this threshold stipulated in the financial covenant.

Effective June 15, 2015, the Company amended the facility agreement dated September 26, 2014, to more accurately reflect the expanded financial capacity of the Company. The amended credit facility agreement requires the Company not to exceed a maximum debt to earnings before interest, tax, depreciation, and amortization ratio.

Effective September 17, 2015, 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 September 23, 2017; the maturity date on the second U.S. $1 billion tranche was extended to September 26, 2020. As at December 31, 2015, the Company remains in compliance with all terms and conditions of the credit facility arrangements and satisfied the threshold stipulated in the amended financial covenant. At December 31, 2015, the facility was undrawn.

In October 2014, CP terminated its existing uncommitted demand bilateral letter of credit facility agreements and entered into bilateral letter of credit facility agreements 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.

At December 31, 2015, under its bilateral facilities the Company had letters of credit drawn of $375 million (December 31, 2014 - $412 million) from a total available amount of $600 million (December 31, 2014 - $600 million). Prior to these bilateral agreements, letters of credit were drawn under the Company’s revolving credit facility. At December 31, 2015, under the terms of the new bilateral letter of credit facilities, no cash and cash equivalents was recorded as “Restricted cash and cash equivalents” (December 31, 2014 – nil).