In a long-running dispute following its acquisition of Kansas City Southern, Canadian Pacific defeated a breach of contract suit brought by bondholders. The U.S. Court of Appeals for the Second Circuit unanimously upheld the lower court’s ruling that no mandatory redemption was required under the bond terms.
The dispute stemmed from bondholder claims tied to CP’s acquisition financing. To fund a portion of that acquisition, CP issued $2.4 billion in notes with a special mandatory redemption provision, allowing early redemption if CP determined, in its reasonable judgement, that the Surface Transportation Board’s final approval would not be received by March 25, 2023.
Bondholders argued that the provision was triggered because, although the STB approved the merger on March 15, 2023, it stated that its decision would not take effect until April 14, 2023. The Second Circuit concluded that the indenture required that the STB decision be rendered by March 25, 2023 and become effective at a definite point in the future.
The appeal was argued by Jeff Wall and the trial court team was led by Adam Paris and Andrew Finn.