by Keri Allan
16 Jun 2021
Canadian National Railway (CN) and Kansas City Southern Railway (KCS) have jointly filed documents requested by the Surface Transportation Board (STB), which will enable the board to review the voting trust in connection with the definitive merger agreement between the two companies.
Earlier in May, the Surface Transportation Board denied CN’s motion to approve a proposed voting trust agreement as incomplete, without prejudice to filing a new motion.
The documents now submitted include written opinions of the financial advisors and debt commitment letters referenced in the merger agreement.
In response to the STB’s request for information on KCS’s pre-existing capital allocation policy, CN and KCS also submitted a verified statement from KCS’s Chief Financial Officer, emphasising the financial strength of KCS and its capital investment plans during the trust period.
“KCS compares very favourably to other Class I railroads in almost every important financial measure including revenue growth, operating ratio, EBITDA, EPS growth, free cash flow yields, debt leverage ratio, liquidity, interest coverage ratio, and funds from operations to debt ratio.
“Today, KCS generates substantially more cash flow than is required for our annual investment needs. We have more than sufficient access to capital to fund our three-year capital investment plan.”
The CN-KCS voting trust has been designed to ensure KCS’s independence and freedom of action during the trust period, and to give CN and KCS the opportunity to demonstrate the merits of the CN-KCS combination.
CN and KCS look forward to the STB’s review and are confident that their voting trust will go through. STB’s official public comment period is open until 28 June.
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