Research Update: Union Pacific Corp. Corporate Credit Rating Lowered To 'A-' From 'A' On $20 Billion Share Buyback Plan; Outlook Stable

North American railroad operator Union Pacific Corp. has announced a $20 billion share repurchase plan to be completed through 2020. The share repurchases will be partially debt financed, and result in weaker credit metrics, with debt/EBITDA expected to increase over that period to the mid 2x area from 1.7x in 2017, and the funds from operations (FFO)-to-debt ratio declining to the high 20% area from 43%. We are lowering the corporate credit rating on Union Pacific to 'A-' from 'A' and the short-term rating to 'A-2' from 'A-1'. The stable outlook reflects our expectation that Union Pacific's credit metrics will remain relatively consistent at their new levels through 2020, pro forma for the share repurchases. On May 31, 2018, S&P

...+ North American railroad operator Union Pacific Corp. has announced a $20 billion share repurchase plan to be completed through 2020. + The share repurchases will be partially debt financed, and result in weaker credit metrics, with debt/EBITDA expected to increase over that period to the mid 2x area from 1.7x in 2017, and the funds from operations (FFO)-to-debt ratio declining to the high 20% area from 43%. + We are lowering the corporate credit rating on Union Pacific to 'A-' from 'A' and the short-term rating to 'A-2' from 'A-1'. + The stable outlook reflects our expectation that Union Pacific's credit metrics will remain relatively consistent at their new levels through 2020, pro forma for the share repurchases....

Research Update