New York, 03-10-95 -- Moody's Investors Service placed the A2 long-term debt rating and the Prime-1 rating for commercial paper of Union Pacific Corporation (UP) under review for possible downgrade. In a related action, Moody's placed the long-term debt rating of Chicago & North Western Railway Company under review for possible upgrade. The rating actions follow today's announcement that UP has reached an agreement pursuant to which the company would buy the remaining outstanding common shares of Chicago & North Western Transportation Company (CNW) which it does not already own in an all cash transaction valued at $1.2 billion. The proposed transaction does not require further Interstate Commerce Commission approval, but is subject to approval by both companies' boards of directors.
The ratings under review are:
Union Pacific Corporation -- A2 rated senior unsecured debt; A2 counterparty rating; (P)"a2" rated shelf registration for preferred stock; and Prime-1 rating for commercial paper.
Union Pacific Railroad Company -- Aa1 rated equipment trust certificates.
Chicago & North Western Railway Company -- A3 rated equipment trust certificates.
According to Moody's, the announced transaction is consistent with UP's expansion strategy, and should strengthen its position in the movement of coal from the Powder River Basin. Moody's review will focus on the opportunities for further cost savings and operating synergies from closer linkage of the two rail systems, as well as the impact of the debt funded transaction on UP's financial leverage and debt-protection measurements. The review will also consider UP's ability to reduce acquisition debt with internally generated funds, and the relative priority of CNW's existing debt obligations in the resulting capital structure of the combined entity.
Union Pacific Corporation, headquartered in Bethlehem, Pennsylvania, is the holding company for Union Pacific Railroad Company, a Class I railroad. Chicago & North Western Transportation Company is the holding company for Chicago & North Western Railway Company, operating in the central transcontinental corridor. UP currently owns approximately 29% of CNW.
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