CN expects to use net proceeds from the sale of debt securities under the shelf prospectus for general corporate purposes, including the redemption and refinancing of outstanding debt, share repurchases, acquisitions, and other business opportunities.
A registration statement relating to these securities has been filed with the SEC but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
A copy of the final shelf prospectus will be available on the Canadian Securities Administrators’ web site, www.sedar.com, or the SEC’s website, www.sec.gov. It may also be obtained from the Corporate Secretary, Canadian National Railway Company, 935 de La Gauchetière Street West, Montreal, Que., H3B 2M9 (Telephone: 514-399-7091).
— From a Canadian National news release. Feb. 11, 2020
If CN is “rolling in cash” why not either share it with the stockholders or pay down debt with out incurring new debt. Although it does make sense to bay down debt with cheaper debt if you are not going to decrease debt over all.
Stock repurchase benefits only help the average stock holder when he/she sells it. A balance sheet number is useless to some one who is looking to have a real investment for (for example) a retirement income or a source of future income. Stock buy backs benefit mostly senior executives who get stock as some for of compensation or in this Ponzi economy as a measure for lowering borrowing costs.
What is the “bubble,” Braden? Normally I’m more than a little skeptical of stock buybacks and debt financing (because quite often another term for it is “shenanigans”), but CN is rolling in cash, even in this downturn. They’ve been adding capacity at a furious pace; they’ve been posting record OR’s while growing business — something Lance Fritz and Jim Foote can’t seem to grasp. I’d like to understand better the opposition.
As the husband of a holder of CN stock I object to them using any proceeds from debt sales to buy back stock. If you insist on increasing your debt load, use the proceeds to increase capacity, then use the excess capacity to attract new customers.
Walter and Noel,
It’s quite obvious neither of you understand how using low interest debt issued now for, amongst other things, stock buy backs, benefits everyone that currently holds CN stock. It’s also a good way to pay down higher interest debt as stated in the article, and since it’s issued when interest rates are low it won’t be affected when interests rate go up, the interest rate on debt stays at the level it was when sold. Also, in case no one has noticed CN uses some of their free cash flow for capacity expansion as they’ve been doing for the last several years, no reason to use debt for that when you can use money from earnings.
The bubble gets bigger…
Unfortunately, this is the consequence of very low interest rates. Debt is easier to build than stock offers. These companies will take on as much debt as possible and leave the share holders paying off the debt when interest rates rise. Low interest rates are bad for the way our markets are made.