SASKATOON – The Canadian government should be willing to swallow up to $500 million of CN Rail’s debt before the crown corporation is put up for sale this fall, says United Grain Growers president Ted Allen.
Otherwise, the company will be too debt-ridden for the private owners and possibly too “financially crippled” to serve prairie farmers well.
Ottawa is proposing to reduce CN’s debt from $2.5 billion to $1.5 billion before shares go on the market.
“I believe $1.5 billion in debt is too much,” Allen said.
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“We need as much competition in this business as possible and if we end up with one carrier crippled with debt, we believe that would not be in the shippers’ interests.”
He said the government can either write down a portion of the debt, or see the value of the share prices fall as investors adjust their interest to reflect the debt they would be inheriting.
“There are two ways of doing it but they end up amounting to the same thing,” he said.
Transport minister Doug Young has said the debt will be reduced by $1 billion, in part by selling some non-rail CN assets. Debt write down could be another option.
The UGG president earlier took his comments about the CN sale to MPs on the House of Commons transportation committee studying legislation to privatize CN.
Good idea, bad method
Allen told the MPs he supports the principle of privatizing the railway but in some ways, the government is going about it the wrong way. By requiring private owners to retain CN head offices in Montreal and to continue to adhere to the requirements of official languages legislation, the government is confusing commercial interests with social policy.
“I think the government has to decide if this is a commercial policy or a social policy,” he said. “The two don’t mix. If you shoot at two different targets with one bullet, you are apt to end up missing both.”
He said UGG is not interested in agriculture minister Ralph Goodale’s recommendation that prairie commodity shippers consider buying into the railway to give themselves a say in its policies.
“We don’t want to run a railway,” he said. “We still have things to learn about running a grain company.”
