S&P Cautions On CP Ship After The Split

Standard & Poor's placed its triple-'B'-corporate credit rating on CP Ships Holdings Inc. and its triple-'B'-minus corporate credit and senior unsecured debt ratings on Legacy Hotels Real Estate Investment Trust on CreditWatch with negative implications. The CreditWatch placements follows Canadian Pacific Ltd.'s announcement that it intends to split into five separate companies (see related press release). Under the proposal, PanCanadian Petroleum, Canadian Pacific Railway, CP Ships, and Fording would become publicly traded companies, each separately owned, operated, and capitalized. Canadian Pacific would then be left with its sole remaining holding of a 100% interest in CP Hotels, constituting the fifth separate company. The financial profile of CP Ships would not change under the current terms of the proposal. Nonetheless, due to Canadian Pacific's involvement, CP Ships had greater access to capital and potential liquidity than most of its competitors. Additionally, CP Ships has a strong relationship with CP Railway through the key gateway of Montreal, and the two subsidiaries had a parent motivated to maintain the strength of each subsidiary. The CP Ships ratings could be affirmed following a review of commercial arraignments between CP Rail and CP Ships, the finalization of any inter-company debt or dividend payments, and a review of CP Ships' financial flexibility/liquidity on a stand-alone basis. – (Reuters)